Title
The Effects of the Euro-Conversion on Prices and Price Perceptions
Author(s)
Giovanni Mastrobuoni Giovanni Mastrobuoni (Princeton University)
Abstract
Despite the expectations of economists that the euro changeover would have no effect on prices, I show that European consumers perceive the contrary. The data indicate that consumers based their perceptions about inflation on goods that are frequently purchased. I 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 Spain, Italy and France show a stronger euro-effect on prices. The data also suggest that this price growth is correlated with consumers' ability to adapt to the new currency.
Creation Date
2004-09
Section URL ID
CEPS
Paper Number
101
URL
https://gceps.princeton.edu/wp-content/uploads/2017/01/101mastrobuoni.pdf
File Function
Jel
D83, F33, L11
Keyword(s)
euro, currency changeover, imperfect information, search costs, price setting
Suppress
false
Series
3