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Did Prices Really Soar after the Euro Cash Changeover? Evidence from ATM Withdrawals

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  • Paolo Angelini

    (Research Department, Bank of Italy)

  • Francesco Lippi

    (University of Sassari and CEPR)

Abstract

The introduction of the euro notes and coins in the first two months of 2002 was followed by a lively debate on the alleged inflationary effects of the new currency. In Italy, as in the rest of the euro area, survey-based measures signaled a much sharper rise in inflation than that measured by the official price indices, the quality of which was called into question. In this paper we gather indirect evidence on the behavior of prices from the analysis of cash withdrawals from automated teller machine (ATM) terminals. Since these data do not rely on official inflation statistics, they provide an independent check for the latter. We present a simple set of assumptions to test the hypothesis that, after the introduction of the euro notes and coins, consumer prices increased more than was recorded by the official statistics. We do not find evidence in support of this hypothesis.

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Bibliographic Info

Article provided by International Journal of Central Banking in its journal International Journal of Central Banking.

Volume (Year): 3 (2007)
Issue (Month): 4 (December)
Pages: 1-22

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Handle: RePEc:ijc:ijcjou:y:2007:q:4:a:1

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  1. Lucas, Robert E, Jr & Stokey, Nancy L, 1987. "Money and Interest in a Cash-in-Advance Economy," Econometrica, Econometric Society, vol. 55(3), pages 491-513, May.
  2. Michael Ehrmann, 2011. "Inflation Developments and Perceptions after the Euro Cash Changeover," German Economic Review, Verein für Socialpolitik, vol. 12(1), pages 33-58, 02.
  3. Giovanni Mastrobuoni, 2004. "The Effects of the Euro-Conversion on Prices and Price Perceptions," Working Papers 101, Princeton University, Department of Economics, Center for Economic Policy Studies..
  4. Bart Hobijn & Andrea Tanbalotti & Federico Ravenna, 2005. "Menu Costs at Work: Restaurant Prices and the Introduction of the Euro," 2005 Meeting Papers 659, Society for Economic Dynamics.
  5. Giovanni Mastrobuoni & Wioletta Dziuda, 2005. "The Euro Changeover and Its Effects on Price Transparency, and Inflation. Mission Euro, Mission Accomplished!," International Finance 0503003, EconWPA, revised 24 May 2005.
  6. Eugenio Gaiotti & Francesco Lippi, 2005. "Pricing behavior and the introduction of the euro: evidence from a panel of restaurants," Macroeconomics 0501029, EconWPA, revised 15 Feb 2005.
  7. Wioletta Dziuda & Giovanni Mastrobuoni, 2009. "The Euro Changeover and Its Effects on Price Transparency and Inflation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 41(1), pages 101-129, 02.
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Cited by:
  1. Michael Ehrmann, 2011. "Inflation Developments and Perceptions after the Euro Cash Changeover," German Economic Review, Verein für Socialpolitik, vol. 12(1), pages 33-58, 02.
  2. Marjan Senjur, 2010. "Differential inflation, Phillips curves, and price competitiveness in a new euro-member country," Economic Change and Restructuring, Springer, vol. 43(4), pages 253-273, November.
  3. Riccardo Cristadoro & Giovanni Veronese, 2011. "Policy Focus: Monetary policy in India: is something amiss?," Indian Growth and Development Review, Emerald Group Publishing, vol. 4(2), pages 166-190, September.
  4. Francisco Craveiro Dias & Cláudia Duarte & António Rua, 2007. "Inflation (mis)perceptions in the euro area," Working Papers w200715, Banco de Portugal, Economics and Research Department.
  5. Christos Shiamptanis, 2010. "Did the euro give us a break in inflation?," Empirical Economics, Springer, vol. 39(2), pages 395-411, October.

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