engleski

Time dynamics of the euro induced inflation perception gap: intervention analysis

The euro cash changeover on 1 January 2002 has elicited a substantial increase of consumers’ inflation perceptions in the euro area, despite actual inflation figures remaining rather stable. Although the inflation perception gap in 2002 has been significantly covered in the literature, only minor efforts have been made in analyzing its persistency after the introduction of euro. Hence this paper adds to the existing literature by examining the nature and magnitude of consumers’ inflation perception errors via Box and Tiao’s intervention analysis. Employing an extensive dataset from 10 euro area countries (and the euro area as a whole) it was found that the euro has indeed induced large and significant inflation perception errors, but the perception gap has, for the most part, remained only a short-run phenomenon.

ARIMA; intervention analysis; euro cash changeover; perceived inflation

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