Impact of the cash changeover on prices and inflation perceptions in the euro area: a survey of the empirical evidence

Paolo Giovane and Roberto Sabbatini ()
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Paolo Giovane: Bank of Italy

Chapter 7. in The Euro, Inflation and Consumer’s Perceptions, 2008, pp 199-230 from Springer

Abstract: Abstract This chapter reviews the studies for other euro-area countries on the issues treated in the preceding chapters for Italy. The discussion turns around two themes. The first, extensively discussed in section 7.2, concerns the wide post-changeover disparity between perceived and officially measured inflation and, more generally, the mechanisms underlying the formation of individual opinions on inflation. The contributions on this theme are differentiated and surveyed according to their method of inquiry.2 One approach hypothesizes that perceptions in the post-changeover period were influenced disproportionately by the price movements of specific subsets of goods and services included in the index, especially those that consumers purchase most frequently. A second approach posits that in concomitance with the changeover perceptions were affected by modifications in the distribution of prices and price changes, above all by the proportion of products whose price changed, the number and the size of the increases compared with the decreases, the exceptionally large increases for certain products and the number of different prices for the same type of product. A third approach relies on experimental psychology and probes more deeply into the mechanisms by which individuals’ price estimates are formed and on the role of memory. Finally, more recent contributions consider a combination of factors and assess their relative importance in a unified analytical framework, going beyond the specific case of the changeover; a few of them also refer to quantitative measures of inflation perceptions, as in chapter 6 for Italy.

Keywords: Empirical Evidence; Experimental Psychology; Quantitative Measure; Analytical Framework; Price Change (search for similar items in EconPapers)
Date: 2008
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DOI: 10.1007/978-3-540-78370-1_8

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