Euro changeover efect on inflation in Slovenia
Inflation in Slovenia has declined significantly since 2002. The sustainable lowering of inflation and its stable developments in 2006 were the result of coordinated policy measures of the Bank of Slovenia and the government.
Following stable price developments, Slovenia adopted the euro in January 2007. As a second entrant country, Slovenia took advantage of other euro zone countries’ good practices at the time of euro adoption. The government and the Bank of Slovenia took measures to ensure a smooth transition to the euro, notably the dual pricing that was introduced nine months prior to the euro
changeover, and an information campaign aimed at informing the broad public about the possible risk in the process of the currency changeover.
As a result, inflation remained stable in the month prior to euro adoption and immediately after it. Average inflation stayed stable at 2.5 % in the last three months, whereas year-on-year inflation amounted to 2.3 % in November 2006 and declined to 2.1 % in February 2007. The euro changeover has not affected long-term inflation dynamics, but has had a significant effect on some groups of the CPI, notably on services in restaurants and cafes.
On the basis of the analysis of time series properties of each individual price included in the CPI we estimate the total effect of the euro changeover on prices to amount to 0.24 percentage points, being among the smallest recorded in the euro area. Bearing in mind the fact that the final estimation of the euro changeover effect on prices requires an analysis of a longer time series and will thus not be possible before the beginning of the next year, the presented results, based on a limited set of data, must be interpreted as preliminary.
