The Euro Changeover and its Effects on Price Transparency and Inflation

Giovanni Mastrobuoni () and Wioletta Dziuda

No 26, Carlo Alberto Notebooks from Collegio Carlo Alberto

Abstract: Despite the expectations of economists that the euro changeover would have no effect on prices, we show that European consumers perceived the contrary. The data indicate that consumers based their perceptions about inflation on goods that are cheaper and more frequently purchased. We 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 some retailers, aware of the consumers' diffculties in adopting the new currency, used the changeover to increase profits by increasing prices. We also propose an explanation of why this effect was smaller in more concentrated retail markets.

Keywords: euro; currency changeover; imperfect information; search costs; price setting. (search for similar items in EconPapers)
JEL-codes: D83 F33 L11 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2005, Revised 2006
New Economics Papers: this item is included in nep-cba, nep-eec, nep-fmk, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (26)

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Related works:
Journal Article: The Euro Changeover and Its Effects on Price Transparency and Inflation (2009)
Journal Article: The Euro Changeover and Its Effects on Price Transparency and Inflation (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:cca:wpaper:26

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