The Impact of Euro Introduction on the Vertical Price Transmission in the German Food Market - Does Money Illusion Matter?

Thomas Glauben, Jens-Peter Loy and Jochen Meyer ()

No 24634, 2005 International Congress, August 23-27, 2005, Copenhagen, Denmark from European Association of Agricultural Economists

Abstract: In this paper the impact of the introduction of the Euro on the vertical price transmission in German food markets is analyzed. It is hypothesized that following the introduction of the Euro the presence of money illusion might have lead to higher real prices, and if so it is likely accompanied by higher margins between respective wholesale and retail prices. While other studies have mainly focused on the behavior of average prices, here reactions at the individual store level are investigated. For cucumber and carrots the vertical price relationships between retail and wholesale prices are estimated by employing an error correction approach, which is enhanced to test for structural breaks with a flexible time frame using a F-max approach. The results indicate significant changes in the vertical price relationships for one forth of the retailers under study. Though significant the directions of changes do not uniquely fit the theoretical predictions for money illusion. Thus, the majority of German food retailers has not used the introduction of the Euro to increase their mark ups.

Keywords: Financial Economics; Industrial Organization (search for similar items in EconPapers)
Pages: 23
Date: 2005
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://ageconsearch.umn.edu/record/24634/files/cp05gl04.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ags:eaae05:24634

DOI: 10.22004/ag.econ.24634

Access Statistics for this paper

More papers in 2005 International Congress, August 23-27, 2005, Copenhagen, Denmark from European Association of Agricultural Economists Contact information at EDIRC.
Bibliographic data for series maintained by AgEcon Search ().