Advanced Search
MyIDEAS: Login to save this paper or follow this series

The Euro Changeover and its Effects on Price Transparency and Inflation

Contents:

Author Info

  • Giovanni Mastrobuoni
  • Wioletta Dziuda

Abstract

Despite the expectations of economists that the euro changeover would have no effect on prices, we show that European consumers perceived the contrary. The data indicate that consumers based their perceptions about inflation on goods that are cheaper and more frequently purchased. We use this insight to develop and estimate a model of imperfect information that explains why these goods were subject to higher price growth after the changeover. The data indicate that some retailers, aware of the consumers' diffculties in adopting the new currency, used the changeover to increase profits by increasing prices. We also propose an explanation of why this effect was smaller in more concentrated retail markets.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.carloalberto.org/assets/working-papers/no.26.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Collegio Carlo Alberto in its series Carlo Alberto Notebooks with number 26.

as in new window
Length: 37 pages
Date of creation: 2005
Date of revision: 2006
Handle: RePEc:cca:wpaper:26

Contact details of provider:
Postal: Via Real Collegio, 30, 10024 Moncalieri (To)
Phone: +390116705000
Fax: +390116476847
Email:
Web page: http://www.carloalberto.org/
More information through EDIRC

Related research

Keywords: euro; currency changeover; imperfect information; search costs; price setting.;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Fabiani, Silvia & Loupias, Claire & Martins, Fernando & Sabbatini, Roberto (ed.), 2007. "Pricing Decisions in the Euro Area: How Firms Set Prices and Why," OUP Catalogue, Oxford University Press, number 9780195309287, September.
  2. Fabrizio Adriani & Giancarlo Marini & Pasquale Scaramozzino, 2004. "The Inflationary Consequences Of A Currency Changeover: Evidence From The Michelin Red Guide," Royal Economic Society Annual Conference 2004 45, Royal Economic Society.
  3. 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.
  4. Franco Mostacci & Roberto Sabbatini, 2003. "L 'euro ha creato inflazione? Changeover e arrotondamenti dei prezzi al consumo in Italia nel 2002," Moneta e Credito, Economia civile, vol. 56(221), pages 45-95.
  5. Luis J. Álvarez & Ignacio Hernando, 2006. "Competition and price adjustment in the euro area," Banco de Espa�a Working Papers 0629, Banco de Espa�a.
  6. Paolo Angelini & Francesco Lippi, 2006. "Did inflation really soar after the euro cash changeover? Indirect evidence from ATM withdrawals," Temi di discussione (Economic working papers) 581, Bank of Italy, Economic Research and International Relations Area.
  7. Diamond, Peter A., 1971. "A model of price adjustment," Journal of Economic Theory, Elsevier, vol. 3(2), pages 156-168, June.
  8. Salop, Steven & Stiglitz, Joseph E, 1977. "Bargains and Ripoffs: A Model of Monopolistically Competitive Price Dispersion," Review of Economic Studies, Wiley Blackwell, vol. 44(3), pages 493-510, October.
  9. Bart Hobijn & Federico Ravenna & Andrea Tambalotti, 2004. "Menu costs at work: restaurant prices and the introduction of the euro," Staff Reports 195, Federal Reserve Bank of New York.
  10. Luc Aucremann & David Cornille, 2001. "Attractive prices and euro-rounding effects on inflation," Working Paper Document 17, National Bank of Belgium.
  11. Marco G. Ercolani & Jayasri Dutta, 2006. "The Euro-changeoverand Euro-inflation: Evidence from Eurostat's HICP," Discussion Papers 06-03, Department of Economics, University of Birmingham.
  12. Aucremanne, L. & Cornille, D., 2001. "Attractive Prices and Euro-Rounding Effects on Inflation," Papers 17, Warwick - Development Economics Research Centre.
  13. Paolo Del Giovane & Roberto Sabbatini, 2004. "LÂ’introduzione dellÂ’euro e la divergenza tra infl azione rilevata e percepita," Temi di discussione (Economic working papers) 532, Bank of Italy, Economic Research and International Relations Area.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:cca:wpaper:26. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Giovanni Bert).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.