The Euro Changeover and its Effects on Price Transparency and Inflation
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.
|Date of creation:||2005|
|Date of revision:||2006|
|Contact details of provider:|| Postal: Via Real Collegio, 30, 10024 Moncalieri (To)|
Web page: http://www.carloalberto.org/
More information through EDIRC
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.:
- 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.
- Angelini, Paolo & Lippi, Francesco, 2005. "Did Inflation Really Soar After the Euro Cash Changeover? Indirect Evidence from ATM Withdrawals," CEPR Discussion Papers 4950, 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,"
0501029, EconWPA, revised 15 Feb 2005.
- 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.
- 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.
- 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.
- 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.
- Luis J. Álvarez & Ignacio Hernando, 2006. "Competition and price adjustment in the euro area," Working Papers 0629, Banco de España;Working Papers Homepage.
- 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.
- Diamond, Peter A., 1971. "A model of price adjustment," Journal of Economic Theory, Elsevier, vol. 3(2), pages 156-168, June.
- Giancarlo Marini & Fabrizio Adriani & Pasquale Scaramozzino, 2003.
"The Inflationary Consequences of a Currency Changeover: Evidence from the Michelin Red Guide,"
CEIS Research Paper
27, Tor Vergata University, CEIS.
- 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.
- Paolo Del Giovane & Roberto Sabbatini, 2004. "Lï¿½introduzione dellï¿½euro 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.
- Luc Aucremann & David Cornille, 2001. "Attractive prices and euro-rounding effects on inflation," Working Paper Document 17, National Bank of Belgium.
- Aucremanne, L. & Cornille, D., 2001. "Attractive Prices and Euro-Rounding Effects on Inflation," Papers 17, Warwick - Development Economics Research Centre.
- Steven Salop & Joseph Stiglitz, 1977. "Bargains and ripoffs: a model of monopolistically competitive price dispersion," Special Studies Papers 94, Board of Governors of the Federal Reserve System (U.S.).
- 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, June.
- Steven Salop & Joseph Stiglitz, 1977. "Bargains and Ripoffs: A Model of Monopolistically Competitive Price Dispersion," Review of Economic Studies, Oxford University Press, vol. 44(3), pages 493-510.
- 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.
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 references are entirely missing, you can add them using this form.