Household Perceptions of Inflation and the Euro
Authors: G. Hardouvelis, O. Kosma, E. Simintzi
Publication: Economy & Markets, Eurobank Research, Issue 5, Volume 2, June 2007
- Households in Greece and in the remaining countries of the Eurozone are pessimistic about inflationary developments, particularly after the introduction of euro coins and banknotes. On the contrary, households in Denmark, the UK and Sweden, the three EU-15 countries that have not adopted the euro, do not share the same pessimism.
- Prior to the introduction of the Euro in scriptural form, household perceptions of past inflation were positively related to actual past inflation. However, following the introduction of euro coins and banknotes on 01/01/2002, the positive correlation broke down in the Eurozone countries. It did not break down in the three countries outside the Eurozone.
- The different post-2001 pattern of household inflation perceptions, as well as their correlation with actual inflation, across EMU and non-EMU countries, suggests the presence of causal link from the introduction of euro coins and banknotes to the increasing pessimism about inflation in Greece and the Eurozone.