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

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  • 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
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Handle: RePEc:ecj:ac2004:45
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  1. Cooper, Russell & Ross, Thomas W, 1984. "Prices, Product Qualities and Asymmetric Information: The Competitive Case," Review of Economic Studies, Wiley Blackwell, vol. 51(2), pages 197-207, April.
  2. Chan, Yuk-Shee & Leland, Hayne, 1982. "Prices and Qualities in Markets with Costly Information," Review of Economic Studies, Wiley Blackwell, vol. 49(4), pages 499-516, October.
  3. 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 531-51, June.
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Cited by:

  1. Fehr, Ernst & Tyran, Jean-Robert, 2004. "Money Illusion and Coordination Failure," IZA Discussion Papers 1013, Institute for the Study of Labor (IZA).
  2. Giovanni Mastrobuoni & Wioletta Dziuda, 2005. "The Euro Changeover and its Effects on Price Transparency and Inflation," Carlo Alberto Notebooks 26, Collegio Carlo Alberto, revised 2006.
  3. 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.
  4. 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.
  5. Marco Ercolani, 2010. "Transitional price rises with the adoption of the euro: aggregate and disaggregate sector evidence," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 13(2), pages 137-157.
  6. Bart Hobijn & Federico Ravenna & Andrea Tambalotti, 2006. "Menu Costs at Work: Restaurant Prices and the Introduction of the Euro," The Quarterly Journal of Economics, MIT Press, vol. 121(3), pages 1103-1131, 08.
  7. Becchetti, Leonardo & Hasan, Iftekhar & Mavrotas, George, 2005. "Education, Financial Institutions, Inflation and Growth," Working Paper Series RP2005/72, World Institute for Development Economic Research (UNU-WIDER).
  8. Christos Shiamptanis, 2010. "Did the euro give us a break in inflation?," Empirical Economics, Springer, vol. 39(2), pages 395-411, October.
  9. 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.
  10. 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.
  11. 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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