Cyprus and International, Economic Analysis

The differential rate of inflation between the poor and the rich following the introduction of the euro

The differential rate of inflation between the poor and the rich following the introduction of the euro
Authors: G. Hardouvelis, O. Kosma, E. Simintzi
Publication: Economy & Markets, Eurobank Research, Issue 3, Volume 3, April 2007

Key points:

  • We utilize the Greek Statistical Agency’s Household Budget Survey on 6.5 thousand households in 2004/2005 to construct separate inflation indices for the poor (21.7% of the sample, with income below 60% of median income) and rich (29.5% of the sample with income above 140% of median income).
  • Over the period 1990-2007, there is no difference in the average inflation the two groups face, although after 1/1/2001, in 54 months the poor faced a higher inflation than the rich, whereas in only 19 months the rich faced a higher inflation than the poor.
  • Since the introduction of the euro in 1/1/2001, the poor face greater inflation uncertainty than the rich and this may explain their discontent with the euro.
  • The divergence in the uncertainty of inflation between the rich and the poor grows larger when comparing the more extreme tails of the income distribution, the poorest 10% and the richest 10%.

Download The differential rate of inflation between the poor and the rich following the introduction of the euro pdf

Related Posts