Fiscal Council Rejects link between euro adoption and inflation

According to an analysis by Bulgaria’s Fiscal Council, the adoption of the euro is a nominal change with no intrinsic link to higher inflation. Inflation, the institution argues, is driven by real factors rather than the currency switch itself, including military conflicts, production costs, demand conditions, energy prices and economic policy.

A week before the lev was withdrawn from circulation, prices and incomes were recalculated at the fixed conversion rate, a process that did not lead to an increase in the money supply, the Fiscal Council notes. Experience across the euro area suggests only a minimal, one-off effect, while the widespread perception of a general rise in prices or inflation is often psychological rather than real, according to the analysis.

Editor: Ivo Ivanov

Posted in English by E. Radkova