Did the introduction of the euro lead to money illusion? Empirical evidence from Germany

Benjamin Bittschi and Saskia Duppel

No 15-058, ZEW Discussion Papers from ZEW - Leibniz Centre for European Economic Research

Abstract: Using the introduction of the euro as a natural experiment, we provide economy-wide evidence for money illusion based on declared donations from German administrative income tax data. Our results suggest a magnitude of the money illusion effect between 2.4% and 7.6%. Compared to previous studies on money illusion in the course of the euro currency changeover this effect size is significantly lower. We trace this back to the more comprehensive donation data in our study compared to hitherto studied face-to-face collections, which makes our results less prone to "power of the ask" and social pressure effects.

Keywords: money illusion; euro introduction; charitable giving; natural experiment (search for similar items in EconPapers)
JEL-codes: D12 E03 E40 (search for similar items in EconPapers)
Date: 2015
New Economics Papers: this item is included in nep-eec and nep-mac
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:zewdip:15058

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