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Scope

To limit the scope of this question, it focuses on the Euro only.

Assumptions

  • I assume there is a difference between the devaluation of the Euro, and inflation. This assumption is based on the definition/description of inflation as given by the European Union. To be explicit, the inflation is a function of some basket of weighted consumption goods, whereas the currency devaluation applies to all things one can buy equally.
  • I assume currency deflation can be seen as a function of the average price increase of all things one can buy, including gold, properties etc. This latter assumption also circumvents the point made in the answer below, stating currency devaluation would, in the past, typically be expressed as a function of other currencies which would generally also be subject to inflation.

Based on these two consumptions, one could create a list of two percentages per year; one for inflation and another for currency devaluation.

Question

Is there historic data of the last 20 years on the difference between the devaluation of the Euro, and inflation?

Attempts

At least the inflation within the European Union has been calculated and used for policymaking. Below is the inflation of the last 20 years(source):

European Union Inflation Rate 2002-2022</a>enter image description here

I could not yet find data on the currency deflation yet though.

1 Answer 1

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Depending on context, the two terms may mean basically the same thing (though common usage implies specific meaning for each). Roughly speaking, either 'inflation' or 'devaluation' refers to the drop in value associated with a particular currency over time.

In common usage, inflation is really an 'internal' / 'national' concept that refers to this currency's reduced ability to purchase goods and services over time (typically referring to an 'average basket of equivalent goods' bought each year, when used as a calculated number).

In common usage, devaluation implies to me a reference to the comparative value of this currency compared to another currency over time, rather than direct comparison to the associated goods and services your currency could buy with that currency. For goods and services produced locally, currency devaluation will have minimal impact compared with goods and services imported from other countries. Inflation is an overall 'average' concept, and some things will cost the same year over year, while other things will move close to the reported average inflation levels (or perhaps higher).

Example of usage for each

Inflation: "Last year, 1 Euro could buy you a candy bar. This year, a candy bar would cost you 1.07 Euros. Another sign of inflation!"

Devaluation: "Last year, 1 Euro could buy you $1.4 USD. This year, 1 EURO can only buy you $1.02 USD. The Euro has really devalued against the USD!"

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  • Thank you for your careful explanation. I agree, the devaluation could, in the past, typically be expressed as a function of other currencies, which I think also mostly are subject to inflation. However, I think a more accurate measurement of pure currency deflation would be a function of average currency deflation observed over all goods, not merely the subjective "consumption" basket defined under the term "inflation". So I am asking about the currency devaluation as an average of all prices, including gold, property etc. This is significantly different from "inflation" as defined by the EU.
    – a.t.
    Commented Sep 13, 2022 at 20:23
  • @a.t. 'inflation' is a broad term with no specific technical definition - it is also very hard to quantify. "CPI" (the Consumer Price Index, which member states of the OECD individually calculate to create useful comparatives on similar terms between countries) is one method of calculation. It seems you are proposing that a different calculation of inflation be made - that's fine, there are several methods of calculating it, but I don't see what that has to do with your question about "devaluation" vs "inflation". Commented Sep 13, 2022 at 20:30
  • The fact is, inflation is really only useful as a general concept, with regards to personal finances. Some personal expenses you incur yourself may rise substantially (accommodations, food, and transportation being recent examples that hit many people harder than the quoted 7-10% figures), and some may stay flat. Sometimes you may be able to shift buying patterns to keep expenses constant, sometimes you have no choice but to suffer increased costs. Don't worry too much about whether CPI is technically a very good economic indicator, when it comes to personal finances. Commented Sep 13, 2022 at 20:36

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