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- W1592727995 abstract "The conversion into euro of prices expressed in their current national denominations has raised fears as to its effect on inflation in most Member States participating in the Monetary Union. In order to assess the extent to which these fears are warranted in the Portuguese case, the National Statistics Office (INE) and the Banco de Portugal have defined a set of simulations, making it possible to envisage three scenarios under which the impact of the conversion on the Consumer Price Index (CPI) can be analysed. The simulations were conducted by the INE, taking as a basis the price sample from which the national CPI for January 2001 was computed. This monthly sample was chosen so as to ensure that simulations were affected by the same seasonal effects which will likely occur in January 2002, the month in which the new euro banknotes and coins will start being used. This paper’s aim was not estimate the probable change in the CPI in January 2002, or even to fully assess all the potential effects of conversion, all the more as it would be virtually impossible to thoroughly isolate, from among general price changes, those exclusively attributable to the conversion of banknotes and coins from escudos into euro. It is even possible that conversion may sometimes be used as a pretext for a price change, which would inevitably occur whether or not there was a conversion. These price revisions essentially depend on the changes that companies face as regards production and market conditions. However, in addition to these key factors, price revisions can also be influenced by the so-called “menu costs”. These costs basically correspond to expenditure related to the replacement of labels, of catalogues and, more generally, of the information on the prices charged. The existence of this type of costs tends to limit the frequency of price revisions. Considering that these changes are inevitable, the conversion of prices from escudos into euro, may lead to earlier price revisions. However, the fact that the dual display of prices has already started and that the conversion will last until the end of February 2002, is likely to smooth this type of effect. Actually, it should be noted that other types of factors are likely to have an opposite effect, in particular the potential beneficial effects on production costs and market operation brought about by the use of the same monetary unit in twelve European Union countries. These factors will tend to last over a far longer period than the first two months of 2002. In addition, the conversion may give rise, at least during these two transition months, to a higher sensitivity of consumers to differences among prices charged for the same goods in different retailers. The possibility of a strong negative" @default.
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- W1592727995 date "2001-01-01" @default.
- W1592727995 modified "2023-09-26" @default.
- W1592727995 title "Conversion of Prices from Escudos into Euro: Quantitative Estimate of its Effect on the CPI" @default.
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