Did inflation really soar after the euro cash changeover? Indirect evidence from ATM withdrawals
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 measured by the official price indices, whose quality was called into question. In this paper we gather indirect evidence on the behavior of prices from the analysis of cash withdrawals from ATM and their determinants. Since these data do not rely on official inflation statistics, they provide an independent check for the latter. We present a model in which the relationship between aggregate ATM withdrawals and aggregate expenditure is not homogenous of degree one in the price level, a prediction which is strongly supported by the data. This feature allows us to test the hypothesis that, after the introduction of the euro notes and coins, consumer prices underwent an increase not recorded by official inflation statistics. We do not find evidence in support of this hypothesis.
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- Bart Hobijn & Andrea Tanbalotti & Federico Ravenna, 2005.
"Menu Costs at Work: Restaurant Prices and the Introduction of the Euro,"
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- Bart Hobijn & Federico Ravenna & Andrea Tambalotti, 2006. "Menu Costs at Work: Restaurant Prices and the Introduction of the Euro," The Quarterly Journal of Economics, Oxford University Press, vol. 121(3), pages 1103-1131.
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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.
- 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.
- repec:pri:cepsud:101mastrobuoni is not listed on IDEAS
- 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.
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