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Inflation Developments and Perceptions after the Euro Cash Changeover

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  • Michael Ehrmann

Abstract

This paper analyses the evolution of inflation and of consumers’ inflation perceptions in the aftermath of the euro cash changeover. It finds that the cross-country variation of food product inflation was dependent on the complexity of conversion rates, with statistically significant and economically sizeable effects especially for low-priced items sold in mid-priced stores. The paper also shows that cross-country differences in the mismatch of perceived and actual inflation were linked to differences in the complexity of conversion rates. These results are in line with theories of finite information-processing capacities on the side of consumers.
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  • Michael Ehrmann, 2011. "Inflation Developments and Perceptions after the Euro Cash Changeover," German Economic Review, Verein für Socialpolitik, vol. 12(1), pages 33-58, February.
    • Handle: RePEc:bla:germec:v:12:y:2011:i:1:p:33-58
    DOI: j.1468-0475.2010.00503.x
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    Cited by:

    1. Daniel Dias, 2006. "Measuring the Importance of the Uniform Nonsynchronization Hypothesis," Working Papers w200603, Banco de Portugal, Economics and Research Department.
    2. Daniel Levy & Avichai Snir, 2022. "Potterian economics," Oxford Open Economics, Oxford University Press, vol. 1, pages 1-32.
    3. Levy, Daniel & Lee, Dongwon & Chen, Haipeng (Allan) & Kauffman, Robert J. & Bergen, Mark, 2011. "Price Points and Price Rigidity," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 93(4), pages 1417-1431.
    4. Christian Bauer & Sebastian Weber, 2016. "The Efficiency of Monetary Policy when Guiding Inflation Expectations," Research Papers in Economics 2016-14, University of Trier, Department of Economics.
    5. Vitale, Paolo, 2006. "A market microstructure analysis of foreign exchange intervention," Working Paper Series 629, European Central Bank.
    6. Levy, Daniel & Snir, Avichai, 2013. "Shrinking Goods," EconStor Preprints 104552, ZBW - Leibniz Information Centre for Economics.
    7. Lamla, Michael J. & Lein, Sarah M., 2014. "The role of media for consumers’ inflation expectation formation," Journal of Economic Behavior & Organization, Elsevier, vol. 106(C), pages 62-77.
    8. Paolo Angelini & Francesco Lippi, 2008. "Did prices really soar after the euro cash changeover? Evidence from ATM withdrawals," Springer Books, in: Paolo Giovane & Roberto Sabbatini (ed.), The Euro, Inflation and Consumer’s Perceptions, chapter 4, pages 109-124, Springer.
    9. Sarah M. Lein & Thomas Maag, 2011. "The Formation Of Inflation Perceptions: Some Empirical Facts For European Countries," Scottish Journal of Political Economy, Scottish Economic Society, vol. 58(2), pages 155-188, May.
    10. Lippi, Francesco & Angelini, Paolo, 2005. "Did Inflation Really Soar After the Euro Cash Changeover? Indirect Evidence from ATM Withdrawals," CEPR Discussion Papers 4950, C.E.P.R. Discussion Papers.
    11. Avichai Snir & Daniel Levy, 2011. "Shrinking Goods and Sticky Prices: Theory and Evidence," Working Papers 2011-03, Bar-Ilan University, Department of Economics.
    12. Felix Hüfner & Isabell Koske, 2008. "The Euro Changeover in the Slovak Republic: Implications for Inflation and Interest Rates," OECD Economics Department Working Papers 632, OECD Publishing.
    13. Duca, Ioana A. & Kenny, Geoff & Reuter, Andreas, 2018. "Inflation expectations, consumption and the lower bound: micro evidence from a large euro area survey," Working Paper Series 2196, European Central Bank.
    14. Parsley, David & Wei, Shang-Jin, 2008. "In search of a euro effect: Big lessons from a Big Mac Meal?," Journal of International Money and Finance, Elsevier, vol. 27(2), pages 260-276, March.
    15. Valentin Jouvanceau, 2021. "The Effect of the Euro Changeover on Prices: Evidence from Lithuania," Bank of Lithuania Working Paper Series 93, Bank of Lithuania.
    16. repec:rim:rimwps:04-07 is not listed on IDEAS
    17. Lunn, Pete & Duffy, David, 2010. "The Euro Through the Looking-Glass: Perceived Inflation Following the 2002 Currency Changeover," Papers WP338, Economic and Social Research Institute (ESRI).
    18. Amelie Gamble, 2007. "The “Euro Illusion”: Illusion or Fact?," Journal of Consumer Policy, Springer, vol. 30(4), pages 323-336, December.

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