IDEAS home Printed from https://ideas.repec.org/a/onb/oenbmp/y2007i1b3.html
   My bibliography  Save this article

The Development of Euro Prices – Subjective Perception and Empirical Facts

Author

Listed:

Abstract

This study compares consumers’ subjective price perceptions with official inflation data for the period from the euro cash changeover in 2002 to 2006. At an annual average of 1.7%, the overall rate of inflation has remained low over the past five years despite adverse effects exerted by external factors such as the marked increase in oil prices. In contrast, the prices of frequently purchased consumer goods and services, which people commonly use as price benchmarks, experienced an upward drift. This effect has been potentiated by psychological factors, e.g. price increases tend to fix themselves more firmly in people’s minds than price reductions (of which there have also been a considerable number). In addition, some groups within the population have yet to develop sufficiently firm value perceptions in euro and stop converting euro prices into schilling. Mentally comparing current euro prices with schilling prices that are more than five years old simply distorts the perception of inflation. Yet survey data show that consumers’ value perception is continually improving. The subjective impression of euro-induced inflation has therefore tended to lessen, and by the end of 2006, it was considerably lower than when euro cash was initially introduced. These developments give rise to the hope that people have largely overcome their impression of a “euro price shock” and that headline inflation and perceived inflation will again develop largely in concert in the future. This trend could be encouraged by increasing efforts to communicate price developments to the public.

Suggested Citation

  • Manfred Fluch & Helmut Stix, 2007. "The Development of Euro Prices – Subjective Perception and Empirical Facts," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), issue 1, pages 55-84.
  • Handle: RePEc:onb:oenbmp:y:2007:i:1:b:3
    as

    Download full text from publisher

    File URL: https://www.oenb.at/dam/jcr:44d310e1-79b8-48ab-8e83-14a4a53f8aba/mop_2007_q1_in_focus_02_tcm16-56381.pdf
    Download Restriction: no

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Tomás Slacík, 2008. "(How) Will the Euro Affect Inflation in the Czech Republic? A contribution to the current debate," FIW Working Paper series 018, FIW.
    2. 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.
    3. 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).
    4. Duffy, David & Lunn, Peter D., 2009. "The Misperception of Inflation by Irish Consumers," The Economic and Social Review, Economic and Social Studies, vol. 40(2), pages 139-163.
    5. Thomas Maag, 2009. "On the accuracy of the probability method for quantifying beliefs about inflation," KOF Working papers 09-230, KOF Swiss Economic Institute, ETH Zurich.

    More about this item

    Keywords

    Austria; euro prices; inflation; perceived inflation;

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:onb:oenbmp:y:2007:i:1:b:3. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Claudia Kwapil). General contact details of provider: http://edirc.repec.org/data/oenbbat.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.