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Empirical Analysis

One Interesting empirical analysis conducted was in Italy to analyse the discrepancy of a particular macroeconomics variable for both post and pre-euro era and the findings illustration is below. The method used was distributing questioners to moviegoers and that analysis tries to find out what the memory of the pre-euro prices would be, while at the same time the researchers investigated the recall and the effect of the post-euro prices 5. 4 Foreigh Affarirs www. foreignaffairs. org/20050501faessay84309/charles-grant/what-if-the-British-vote-no. html

5 Euro, Bank of Italy Memory for Prices and the Euro Cash Changeover: An Analysis for Cinema Prices in Italy http://www. euro. gov. mt/pdf/DelGiovane1. pdf. What materialized after the euro banknotes and coins were introduced was the residents who started using the new currency had felt a much higher surge in prices than what the official statistics registered. What this particular paper calls the cash changeover was the real price surge felt when official sources, such as central banks claimed the impact of the euro introduction on consumer prices was modest.

There were studies that came up with several suggestions as to why there was a disparity between the perceived and measured inflation. Accordingly, DelGiovane and Sabbatini (2006) were among those who cited reasons

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that contributed for that. One of these factors had to do with the psychology how the formation of inflation takes shape and the real experience the price change distribution has on consumers after the exchange takes place, particularly on the frequently used items where the price could go up or down.

One fact that came to the fore was the fact that the service sector had experienced a steep increase in comparison to other sectors. Traut-Mattusch et al. in 2004 have tried to explain the implication of changeovers on the ex-post perception and their expectations. In all this, it is possible that an inaccurate memory could play a role as to what had ensued after the introduction of the euro. What this means is those who could blame the euro for the high prices might not know exactly when the price started rising, which could be before the arrival of the euro.

Consumers’ memory could differ on frequently used goods and durable goods, where especially when it comes to frequently used goods it could be at an expanded span of time when compared to durable goods that consumers do not buy often, but the memory for the durable good could be before the 2002 introduction. Based on these criteria, the particular researchers are basing their assertion on the fact that consumers have imperfect memory of past prices.

Hence, the finding showed that consumers had a much better opinion about the prevalent inflation on the post-changeover period. In order to do that all they need is to remember the price of products they were using in order to calculate the inflation level that was accruing overtime. And what the questioners focus on was to find out if they remember these past prices they were paying for their goods and services. The reality had been inflation had subsided since 2004 particularly in Italy according to the EC survey.

Nevertheless, the perception of the majority of the citizens was that the current price of goods and services were double of what they used to be. One good comparison is the euro would have coasted 1000 lire instead of what it officially would cost now at 1. 936 lire. What this demonstrates is the consumers must have unwavering memory about where pre-euro price was and the researchers were out to investigate if this true. The consumers they targeted for their research were moviegoers that they will try to find out how good their memory would be about pre-euro prices.

The researchers claim that the reason why they chose moviegoers for the survey was because of the precession they believe it could avail when construing the survey to find out what was happening in the past. Those approached for the survey were to be frequent moviegoers and they had to mention their frequency of movie going. In addition, the question is structured in such a way that it can measure as accurately as possible the relationship between price memories and others factor that to have do with the kind of habits they have in using the euro, focusing on the mental conversion from the lira to the euro.

There are also personal characteristics such as age, gender, level of education, and what their occupations are. The actual method had involved the handing out of questioners to at least 225 movie-goers that were under 65 years of age, since those above this age limit are allowed discounts. Two well-known cinemas in Rome were the conducting of the survey took place and it had involved an educated group with a higher income.

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