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The Inflationary Consequences Of A Currency Changeover: Evidence From The Michelin Red Guide

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Listed author(s):
  • Fabrizio Adriani
  • Giancarlo Marini
  • Pasquale Scaramozzino

Abstract

This paper examines the inflationary consequences of a currency changeover in a simple model of the catering market. It is shown that the change in cash denomination acts as a coordination device shifting the industry to a high-price equilibrium. Empirical evidence based on data from the Michelin Red Guide strongly supports the predictions of our model against competing explanations. A permanent change in relative prices has taken place in Euroland, with strong redistributional effects in favour of some segments of the catering sector.

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Paper provided by Royal Economic Society in its series Royal Economic Society Annual Conference 2004 with number 45.

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Date of creation: 17 Sep 2004
Handle: RePEc:ecj:ac2004:45
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  1. Russell Cooper & Thomas W. Ross, 1984. "Prices, Product Qualities and Asymmetric Information: The Competitive Case," Review of Economic Studies, Oxford University Press, vol. 51(2), pages 197-207.
  2. von Ungern-Sternberg, Thomas & von Weizsacker, Carl Christian, 1985. "The Supply of Quality on a Market for "Experience Goods."," Journal of Industrial Economics, Wiley Blackwell, vol. 33(4), pages 531-551, June.
  3. Yuk-Shee Chan & Hayne Leland, 1982. "Prices and Qualities in Markets with Costly Information," Review of Economic Studies, Oxford University Press, vol. 49(4), pages 499-516.
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Cited by:

  1. Fehr, Ernst & Tyran, Jean-Robert, 2007. "Money illusion and coordination failure," Games and Economic Behavior, Elsevier, vol. 58(2), pages 246-268, February.
  2. 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.
  3. 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.
  4. Wioletta Dziuda & Giovanni Mastrobuoni, 2009. "The Euro Changeover and Its Effects on Price Transparency and Inflation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 41(1), pages 101-129, 02.
  5. 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.
  6. Marco Ercolani, 2010. "Transitional price rises with the adoption of the euro: aggregate and disaggregate sector evidence," Journal of Economic Policy Reform, Taylor and Francis Journals, vol. 13(2), pages 137-157.
  7. Bianca Steliana Pîra (Beşa), 2014. "Preparing The Euro Changeover – Romania'S Case," Romanian Economic Business Review, Romanian-American University, vol. 8(2), pages 392-409, December.
  8. Becchetti, Leonardo & Hasan, Iftekhar & Mavrotas, George, 2005. "Education, Financial Institutions, Inflation and Growth," WIDER Working Paper Series 072, World Institute for Development Economic Research (UNU-WIDER).
  9. Ehrmann, Michael, 2006. "Rational inattention, inflation developments and perceptions after the euro cash changeover," Working Paper Series 588, European Central Bank.
  10. Christos Shiamptanis, 2010. "Did the euro give us a break in inflation?," Empirical Economics, Springer, vol. 39(2), pages 395-411, October.
  11. Eugenio Gaiotti & Francesco Lippi, 2004. "Pricing Behavior and the Introduction of the Euro: Evidence from a Panel of Restaurants in Italy," Giornale degli Economisti, GDE (Giornale degli Economisti e Annali di Economia), Bocconi University, vol. 63(3-4), pages 491-526, December.
  12. Thomas A. Eife, 2006. "Price setting behaviour and price setting regulations at the euro changeover," Bank of Estonia Working Papers 2006-06, Bank of Estonia, revised 12 Oct 2006.

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