Perception of Inflation in the Ue
EUROPEAN
MONETARY
INTEGRATION
The perception of INFLATION in Europe
Jorge Yébenes
Lorena Zamora
UEK 2012
INTRODUCTION
Definition of Inflation
Inflation is the phenomenon that consists of continued and general growth on the price of goods and services in an economy in a certain period of time. It doesn’t follow a cyclical cause and does not affect either not an individual or a few.
How can we measure the “inflation”?
To measure inflation, we use a "general index," a ratio, percentage expression. We call it Inflation rate which is the annualized percentage change in CPI (Consumer Price Index) over time.
What goods are involved in the formation of the overall index?
Logically this index covers the majority of the products consumed; that is, according to goods "characteristics", the typical "shopping basket", before statistical study of consumer behavior.
So, within a year the basket costs us 1000 and the following year 1200, we observed that, in general, in percentage terms, the price index has risen by a twenty percent, or 200 units. Following the same reasoning, we can find inflation, the rise in the price of the "basket" each year.
What is officially measured?
In reality there is a "core inflation" in which there are some basic given goods, managed services (gas, electricity and domestic gas) and concerted services (local and foreign transport, telephony, fees and licenses and others), and agriculture products (fruits and vegetables and other products).
Normally we see in a monthly series that core inflation tends to behave smoother, with fewer ups and downs than overall inflation. On the other hand, it is not surprising that at certain times the core inflation might be higher or lower than the overall.
CAUSES OF INFLATION AND THEORICAL BASES
Traditionally have distinguished four main reasons that justify the birth of inflation, which can be observed here (very simple way): Due to the demand: there are two theories,
MONETARY
INTEGRATION
The perception of INFLATION in Europe
Jorge Yébenes
Lorena Zamora
UEK 2012
INTRODUCTION
Definition of Inflation
Inflation is the phenomenon that consists of continued and general growth on the price of goods and services in an economy in a certain period of time. It doesn’t follow a cyclical cause and does not affect either not an individual or a few.
How can we measure the “inflation”?
To measure inflation, we use a "general index," a ratio, percentage expression. We call it Inflation rate which is the annualized percentage change in CPI (Consumer Price Index) over time.
What goods are involved in the formation of the overall index?
Logically this index covers the majority of the products consumed; that is, according to goods "characteristics", the typical "shopping basket", before statistical study of consumer behavior.
So, within a year the basket costs us 1000 and the following year 1200, we observed that, in general, in percentage terms, the price index has risen by a twenty percent, or 200 units. Following the same reasoning, we can find inflation, the rise in the price of the "basket" each year.
What is officially measured?
In reality there is a "core inflation" in which there are some basic given goods, managed services (gas, electricity and domestic gas) and concerted services (local and foreign transport, telephony, fees and licenses and others), and agriculture products (fruits and vegetables and other products).
Normally we see in a monthly series that core inflation tends to behave smoother, with fewer ups and downs than overall inflation. On the other hand, it is not surprising that at certain times the core inflation might be higher or lower than the overall.
CAUSES OF INFLATION AND THEORICAL BASES
Traditionally have distinguished four main reasons that justify the birth of inflation, which can be observed here (very simple way): Due to the demand: there are two theories,
Bibliography: http://www.ecb.int/pub/pdf/scpwps/ecbwp1088.pdf http://ec.europa.eu/index_en.htm http://epp.eurostat.ec.europa.eu/portal/page/portal/eurostat/home/ http://www.investopedia.com/terms/i/inflation.asp http://www.aboutinflation.com http://useconomy.about.com/od/inflationfaq/f/infl_impact.htm http://www.auladeeconomia.com/articulo21.htm http://www.ideasparapadres.com/dinero/inflacion/ http://www.google.com/images