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The Inflationary Consequences of a Currency Changeover on the Catering Sector: Evidence from the Michelin Red Guide

  • Fabrizio Adriani
  • Giancarlo Marini
  • Pasquale Scaramozzino

This paper examines the inflationary consequences of a currency changeover in the catering market. Empirical evidence from the Michelin Red Guide shows that: (i) differently from restaurants in non-euro countries, restaurants in the euro area experienced abnormal price increases just after the changeover; and (ii) among restaurants in the euro area, tourist restaurants are responsible for most of the abnormal price increases. These results suggest that proposed explanations for the changeover effect, such as menu adjustment and rounding up, are only part of the story. We present a simple model of the catering market that is consistent with the evidence. Copyright (c) Blackwell Publishing Ltd and the Department of Economics, University of Oxford, 2008.

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Article provided by Department of Economics, University of Oxford in its journal Oxford Bulletin of Economics and Statistics.

Volume (Year): 71 (2009)
Issue (Month): 1 (02)
Pages: 111-133

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Handle: RePEc:bla:obuest:v:71:y:2009:i:1:p:111-133
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  1. Cannon, Edmund & Cipriani, Giam Pietro, 2006. "Euro-Illusion: A Natural Experiment," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 38(5), pages 1391-1403, August.
  2. Ernst Fehr & Jean-Robert Tyran, 2001. "Does Money Illusion Matter?," American Economic Review, American Economic Association, vol. 91(5), pages 1239-1262, December.
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  8. Gaiotti, Eugenio & Lippi, Francesco, 2005. "Pricing Behaviour and the Introduction of the Euro: Evidence from a Panel of Restaurants," CEPR Discussion Papers 4893, C.E.P.R. Discussion Papers.
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