Book contents
- Frontmatter
- Contents
- Figures
- Tables
- Boxes
- Contributors
- Abbreviations and acronyms
- 1 Introduction
- 2 Towards a new architecture for financial stability in Europe
- Part I The experience of the crisis
- Part II Accession to the euro area
- 7 The road to euro adoption: a comparison of Slovakia and Slovenia
- 8 Is the euro really a ‘teuro’? The effects of introducing the euro on prices of everyday non-tradables in Slovakia
- 9 The euro's contribution to economic stability in Central, Eastern and Southeastern Europe: is euro adoption still attractive?
- 10 Is the euro still attractive for CEE countries?
- Part III The future of the euro area
- Index
- References
8 - Is the euro really a ‘teuro’? The effects of introducing the euro on prices of everyday non-tradables in Slovakia
from Part II - Accession to the euro area
Published online by Cambridge University Press: 07 October 2011
- Frontmatter
- Contents
- Figures
- Tables
- Boxes
- Contributors
- Abbreviations and acronyms
- 1 Introduction
- 2 Towards a new architecture for financial stability in Europe
- Part I The experience of the crisis
- Part II Accession to the euro area
- 7 The road to euro adoption: a comparison of Slovakia and Slovenia
- 8 Is the euro really a ‘teuro’? The effects of introducing the euro on prices of everyday non-tradables in Slovakia
- 9 The euro's contribution to economic stability in Central, Eastern and Southeastern Europe: is euro adoption still attractive?
- 10 Is the euro still attractive for CEE countries?
- Part III The future of the euro area
- Index
- References
Summary
Introduction
When euro notes and coins were originally introduced in January 2002, consumers in the member states of the Eurozone experienced a sharp spike in perceived inflation, which translated into a permanent perception that the switch to the new currency was associated with a one-time inflation shock. As evidence of this, the synthetic indicator of perceived inflation over the previous twelve months compiled by the European Commission from consumer surveys showed a jump from 27 in December 2001 to 60 in September 2002 and remained above 50 for most of 2002. The most succinct summary of this view was coined in Germany, where the euro was promptly dubbed ‘teuro’ (from teuer, meaning ‘expensive’ in German).
For consumer prices as a whole, the perception was largely disproved by the actual data on the development of consumer prices during the relevant period. Prices in January 2002 rose by 0.09 per cent in the Eurozone according to the harmonised index of consumer prices (HICP) and the annual inflation rate during 2002 was also similar to 2001 and 2003, oscillating between 2 per cent and 3 per cent (although there was an unusual jump at the beginning of 2002, attributed mainly to the weather). Therefore, the explanations of discrepancies between the perceived and the actual inflation tended to focus on either purely psychological interpretations of how individuals could experience higher inflation at the time of a change in currencies without any basis in reality, or interpretations combining higher-than-normal changes in specific prices, which are likely to form anchors of consumer experiences, with psychologically based misconceptions.
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- The Euro Area and the Financial Crisis , pp. 157 - 183Publisher: Cambridge University PressPrint publication year: 2011