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Please use this identifier to cite or link to this item: http://hdl.handle.net/2262/41231

Title: The Euro Through the Looking-Glass: Perceived Inflation Following the 2002 Currency Changeover
Author: LUNN, PETE
DUFFY, DAVID
Author's Homepage: http://people.tcd.ie/duffyd6
http://people.tcd.ie/lunnp
Keywords: Euro changeover
uncertainty
inflation perceptions
inflation expectations
consumer behaviour
Issue Date: 2010
Citation: Lunn, Pete; Duffy, David, The Euro Through the Looking-Glass: Perceived Inflation Following the 2002 Currency Changeover, 2010
Abstract: Following the Euro changeover in January 2002, consumers across the Euro Area perceived a sharp rise in inflation, in contrast to official figures. Several theories have been advanced to explain this apparent economic illusion, but they struggle to account for its striking scale and persistence. We offer an alternative account, based on the premise that the currency changeover increased consumers’ perceptual error when assessing the value of monetary amounts. Under plausible assumptions, this would lead them to experience a loss of purchasing power. We confirm two empirical hypotheses in support of the theory: (1) the extent of overestimation of inflation was strongly associated with subjective difficulty using the Euro; (2) there was a simultaneous downward shift in expected inflation. Our results imply that currency changeovers are not simple matters of numerical conversion.
Description: PUBLISHED
URI: http://hdl.handle.net/2262/41231
Appears in Collections:Administrative Staff Authors (Scholarly Publications)

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