Did prices increase with the euro?
In 1999, the monetary change to Euro took place. This monetary change led to the dissatisfaction of the French population. The daily newspaper reported: ?The prices increased?, ?the Euro made the life expensive?, etc. But is this general dissatisfaction truly justified? We will see through this document that there was certainly a rise of the prices but not significantly.
Moreover the ECB has a role to play in this regard when one speaks about ?the inflationary Euro?. But the question always arises: did it play a role in rising of prices in France? We will answer this question in this document, by studying the institutional aspect initially, and then the real impact of the Euro in the second part and finally the relationship between French and the Euro in last part.
The Maastricht Treaty is the beginning of the Economic and Monetary Union (EMU) leading to the creation of the euro. Between the treaty (in 1992) and the circulation of coins and notes, it took 10 years. Today, more than 300 million Europeans use the euro.
The European Central Bank (ECB) is responsible for defining the main orientations of the single monetary policy in the euro area. Its main objective is price stability and the maintenance of inflation in the euro area below 2%. But it will not do alone, in fact, it will be supported by national central banks in the euro area constituting what is known as the Eurosystem.
The European System of Central Banks (ESCB) comprises the ECB and national central banks (NCB) of the 27 Member States of the European Union. The main objective of the ESCB is to maintain some price stability in the euro area. The Eurosystem and the ESCB will exist as long as there are Member States of the EU zone are not part of the euro area.
The site of INSEE provides us with clear and precise definitions of the terms "key" in this folder.
Inflation: it means the loss of purchasing power of money resulting in an increase in general and sustainable price.
Purchasing power: the amount of goods and services it is possible to obtain a monetary unit. Because of rising prices, the purchasing power of the currency depreciates over time. Outside the country, if it reduces depreciation and devaluation it increases in the opposite case. To observe the evolution of real economic activity (production, consumption) it is necessary to consider the effects of inflation. We can distinguish changes in current prices (without correction for the effect of inflation) changes at constant prices (adjusted for the effect of inflation).
The index of consumer prices: it is used most often to calculate inflation, the latter (according to INSEE) estimates, between two time periods, the average change in prices of products consumed by households. This is a summary measure of changes in commodity prices, constant quality. It is published monthly in the Official Gazette.
For the Bank of France, "all the French do not suffer the same inflation. The index reflects the average household expenditure, but expenditure of all households are not identical."
Therefore INSEE will "simulate" a personal price index. They say that the average consumer does not exist. Each home has its own average basket; according to presence or absence of product is growing faster than average inflation of the household will be higher or lower than average inflation.
Tags: euro; Maastricht Treaty; creation of European Union; Economic and Monetary Union