Did the euro affect inflation in 2001?

14/01/2002 10:00

Inflation in the Netherlands was an average 4.5% in 2001, up from 2.6% in 2000. The introduction of the euro did not lead to a significant rise in inflation in 2001. If there were any extra price increases in anticipation of the new currency, they had only a slight effect. There were enough other causes to explain inflation in 2001.

Average annual inflation, 1980-2001

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Causes of inflation in 2001

More than half of inflation in 2001 can be attributed to a number of specific causes: the rise in the rate of VAT in January, higher prices for gas and electricity, price decreases for motor fuels, rent increases, disappointing crops, problems in the meat sector and the effect of the abolition of the TV licence fee in 2000.

In addition to these there are also a number of more general causes  for inflation: the increases in wage costs, higher rents for shop space, the knock-on effect of higher energy prices but also the on-charged costs of the introduction of the euro. These causes together account for the remaining 2.1 percent points of inflation in 2001. In 1999 and 2000 they accounted for only 1.1 percent points. This share of inflation which cannot be calculated precisely from available figures  has thus risen by 1.0 percent point compared with 2000 on 1999.

Components of inflation 1999-2001

1999

2000

2001

%

Total

2,2

2,6

4,5

Consequence of VAT increase

0,5

Contribution to inflation excluding VAT

2,2

2,6

4,0

of which: specific causes

Gas and electricity

0,0

0,6

0,7

Motor fuels

0,2

0,5

-0,1

House rent

0,7

0,6

0,6

Potatoes, vegetables, fruit

0,1

0,0

0,2

Meat and fish

0,0

0,0

0,3

TV licence fee

0,0

-0,4

0,0

Overseas consumption

0,0

0,2

0,2

total specific causes

1,1

1,4

1,9

of which: other causes

Food and non-alcoholic drinks

0,0

0,1

0,4

Alcohol and tobacco

0,1

0,1

0,2

Clothes and shoes

0,1

-0,1

0,0

Furnishings and household appliances

0,2

0,1

0,3

Transport

0,1

0,2

0,2

Culture and recreation

0,1

0,2

0,3

Hotels, bars and restaurants

0,1

0,1

0,3

Consumption-related taxes and gov. services

0,2

0,2

0,1

Other items

0,2

0,1

0,3

total other causes

1,1

1,1

2,1

Inflation and the euro

Based on these considerations, the conclusion is that no price-increasing effect can be demonstrated in anticipation of the euro, but neither can it be ruled out. If there was already any effect in 2001, it was only very slight and represented only a very small share of the total increase in prices. It will have contributed much less than 1 percent point to inflation

Statistics Netherlands does not yet have information on price rises since 1 January 2002. This will be published on 8 February 2002.

Jan Walschots