Expensive Living: The Greek Experience under the Euro
Apart from its widely accepted direct advantages, the introduction of the euro has been accompanied by a surge of inflation in most of the EU member states. At the same time, wages--in part, wages of the unskilled--are relatively losing ground, while the purchasing power of the average European seems also to have weakened since the introduction of the single currency. In this paper we deal with five relevant central issues to interpret "expensiveness" in Greece. First, we examine to what extent recent inflation trends are attributable to the constraints imposed by the monetary unionÐnamely negative demand disturbances in certain Greek regions. Second, we investigate to what extent these patterns are also due to the adoption of the euro--including conversion period effectsÐover product market and other domestic rigidities. Third, we investigate the impact of seasonal effects on inflation, in the context of the Greek so-called traditional "petit-bourgeois capitalism." Fourth, we explore the extent to which unemployment is another factor that drives wages and purchasing power down. Fifth, we apply the Balassa-Samuelson effect to see whether it constitutes the culprit for price hikes in nontradable products in particular. We find that all the aforementioned factors contribute to the Greek expensiveness.
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Volume (Year): 42 (2007)
Issue (Month): 3 (May)
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References listed on IDEAS
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- 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.
- 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.
- Theodore Mitrakos & Stauros Zografakis, 2005. "The redistributional impact of inflation in Greece," Economic Bulletin, Bank of Greece, issue 24, pages 45-82, January.
- Georgios E. Chortareas & Theodore Pelagidis, 2004. "Trade flows: a facet of regionalism or globalisation?," Cambridge Journal of Economics, Oxford University Press, vol. 28(2), pages 253-271, March.
- Ehrmann, Michael, 2006. "Rational inattention, inflation developments and perceptions after the euro cash changeover," Working Paper Series 0588, European Central Bank.
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