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Coping with People’s Inflation Perceptions During a Currency Changeover

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  • Thomas A. Eife

    ()
    (University of Heidelberg, Department of Economics)

  • W. Timothy Coombs

    ()
    (University of Illinois)

Abstract

The gap between actual and perceived inflation is one of the more unexpected consequences of the euro changeover in January 2002. In this note we argue that this gap was caused by a lack of preparation and experience of the authorities to appropriately communicate with the public during the changeover. Using principles of crisis communication we identify the mistakes made and give policy recommendations for future changeovers.

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File URL: http://www.uni-heidelberg.de/md/awi/forschung/dp435.pdf
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Bibliographic Info

Paper provided by University of Heidelberg, Department of Economics in its series Working Papers with number 0435.

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Length: 13 pages
Date of creation: Dec 2006
Date of revision: Dec 2006
Handle: RePEc:awi:wpaper:0435

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Keywords: crisis communication; transformative explanation; perceived inflation; euro changeover;

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References

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  1. Manfred Fluch & Helmut Stix, 2005. "Perceived Inflation in Austria – Extent, Explanations, Effects," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), issue 3, pages 22–47.
  2. Giovanni Mastrobuoni & Wioletta Dziuda, 2005. "The Euro Changeover and its Effects on Price Transparency and Inflation," Carlo Alberto Notebooks 26, Collegio Carlo Alberto, revised 2006.
  3. Thomas A. Eife, 2006. "Price setting behaviour and price setting regulations at the euro changeover," Bank of Estonia Working Papers 2006-06, Bank of Estonia, revised 12 Oct 2006.
  4. Luc Aucremanne & Marianne Collin & Thomas Stragier, 2007. "Assessing the Gap between Observed and Perceived Inflation in the Euro Area : Is the Credibility of the HICP at Stake ?," Working Paper Research 112, National Bank of Belgium.
  5. Kahneman, Daniel & Tversky, Amos, 1979. "Prospect Theory: An Analysis of Decision under Risk," Econometrica, Econometric Society, vol. 47(2), pages 263-91, March.
  6. Bettina Isengard & Thorsten Schneider, 2006. "The euro and its perception in the German population," Discussion Papers 011, University of Flensburg, International Institute of Management.
  7. Christoph Wunder & Johannes Schwarze & Gerhard Krug & Bodo Herzog, 2006. "Welfare Effects of the Euro Cash Changeover," Discussion Papers of DIW Berlin 646, DIW Berlin, German Institute for Economic Research.
  8. Eife, Thomas, 2006. "Currency Changeovers as Natural Experiments," Munich Dissertations in Economics 5839, University of Munich, Department of Economics.
  9. Brachinger, Hans Wolfgang, 2006. "Euro or “Teuro”?: The Euro-induced Perceived Inflation in Germany," DQE Working Papers 5, Department of Quantitative Economics, University of Freiburg/Fribourg Switzerland.
  10. Ehrmann, Michael, 2006. "Rational inattention, inflation developments and perceptions after the euro cash changeover," Working Paper Series 0588, European Central Bank.
  11. Thomas A. Eife & Stephan Meier, 2007. "Costly Inflation Misperceptions," Working Papers 0455, University of Heidelberg, Department of Economics, revised Oct 2007.
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Citations

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Cited by:
  1. Michael Ehrmann, 2011. "Inflation Developments and Perceptions after the Euro Cash Changeover," German Economic Review, Verein für Socialpolitik, vol. 12(1), pages 33-58, 02.
  2. Lena Dräger & Jan-Oliver Menz & Ulrich Fritsche, 2014. "Perceived inflation under loss aversion," Applied Economics, Taylor & Francis Journals, vol. 46(3), pages 282-293, January.
  3. Badarinza, Cristian & Gross, Marco, 2012. "Information flows and disagreement," Working Paper Series 1475, European Central Bank.
  4. Thomas A. Eife & Stephan Meier, 2007. "Costly Inflation Misperceptions," Working Papers 0455, University of Heidelberg, Department of Economics, revised Oct 2007.
  5. Lena Vogel & Jan-Oliver Menz & Ulrich Fritsche, 2009. "Prospect Theory and Inflation Perceptions - An Empirical Assessment," Macroeconomics and Finance Series 200903, Hamburg University, Department Wirtschaft und Politik.

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