Word: euros
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That sort of talk gives heartburn to E.U. officials and statisticians across Europe because they say it's largely unfounded. Indeed, since 2002, inflation has been rising faster in Britain, which kept its own currency, than in countries that switched to the euro. True, the cost of some everyday items has gone up, at times quite sharply. The German statistics office, for example, has calculated that, since 2000, the price of a man's haircut has risen 7%, a breakfast roll is up 13% while tram tickets are 17% more costly. In France, a cup of coffee...
...economists, psychologists and other experts, the gulf between the public belief in Europe that the euro has sent prices up and official statistics that show it hasn't is providing a rich new area of research, inspring dozens of learned papers with titles such as "Expectancy Confirmation in Spite of Disconfirming Evidence...
Their conclusions tend to be quite similar. Public perceptions of the impact of the euro were skewed, they argue, because people noticed the rise in the cost of everyday items such as coffee and vegetables more than they noticed the declining costs of telephone calls, refrigerators and other less frequently purchased items. That in turn confirmed pre-euro anxieties that the new currency could be inflationary. Extensive media coverage of price rises didn't help. Moreover, some people may have simply not related their spending to what they were earning, and so made mistakes...
...best, a hazy recollection of what things really used to cost. One study by two psychologists and an economist, to be published by the Bank of Italy, asked moviegoers in Rome if they remembered how much cinema tickets used to cost in lire before the introduction of the euro in 2002. Less than 1 in 10 got the amount right, while more than half underestimated the true cost by at least...
...fundamental flaw in the argument of those who believe the euro pushed up inflation significantly is that there's almost no supporting evidence. Italy provides a good example because, in 1993, it experienced a sharp deterioration in household income following a massive lira devaluation. Tens of thousands of people lost their jobs, auto and retail sales crashed and there were other sizable - and measurable - effects on the economy as a whole...