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In Search of a Euro Effect: Big Lessons from a Big Mac Meal?

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  • Parsley, David
  • Wei, Shang-jin

Abstract

We investigate whether the adoption of the euro was accompanied by an increase in prices in member countries, and whether it promoted goods market arbitrage in the form of faster convergence to a common price. By comparing the experience of eurozone countries to non-euro European countries in a ‘difference-in-differences’ specification we net out effects on prices unrelated to the euro. We conclude that (a) there is no evidence of significant price increases associated with the adoption of the euro even for food items; and (b) there is little systematic evidence of a significant improvement in goods market integration following the euro’s introduction.

Suggested Citation

  • Parsley, David & Wei, Shang-jin, 2007. "In Search of a Euro Effect: Big Lessons from a Big Mac Meal?," MPRA Paper 6041, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:6041
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    6. Michael Ehrmann, 2011. "Inflation Developments and Perceptions after the Euro Cash Changeover," German Economic Review, Verein für Socialpolitik, vol. 12(1), pages 33-58, February.
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    Cited by:

    1. Jaanika Meriküll & Tairi Rõõm, 2015. "One Currency, One Price? Euro Changeover-Related Inflation in Estonia," Journal of Common Market Studies, Wiley Blackwell, vol. 53(4), pages 822-839, July.
    2. Becker, Sascha S. & Nautz, Dieter, 2012. "Inflation, price dispersion and market integration through the lens of a monetary search model," European Economic Review, Elsevier, vol. 56(3), pages 624-634.
    3. Alberto Cavallo & Brent Neiman & Roberto Rigobon, 2014. "Currency Unions, Product Introductions, and the Real Exchange Rate," The Quarterly Journal of Economics, Oxford University Press, vol. 129(2), pages 529-595.
    4. Alberto Cavallo & Brent Neiman & Roberto Rigobon, 2015. "The Price Impact of Joining a Currency Union: Evidence from Latvia," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 63(2), pages 281-297, September.
    5. repec:eee:reveco:v:49:y:2017:i:c:p:484-498 is not listed on IDEAS
    6. Kwok Tong Soo, 2016. "Are hamburgers harmless?," Working Papers 127876397, Lancaster University Management School, Economics Department.
    7. Michael Ehrmann, 2011. "Inflation Developments and Perceptions after the Euro Cash Changeover," German Economic Review, Verein für Socialpolitik, vol. 12(1), pages 33-58, February.
    8. repec:eee:ecmode:v:69:y:2018:i:c:p:49-57 is not listed on IDEAS
    9. Jan-Egbert Sturm & Ulrich Fritsche & Michael Graff & Michael Lamla & Sarah Lein & Volker Nitsch & David Liechti & Daniel Triet, 2009. "The euro and prices: changeover-related inflation and price convergence in the euro area," European Economy - Economic Papers 2008 - 2015 381, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.

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    • F3 - International Economics - - International Finance

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