Psychological Costs of Currency Transition: Evidence from Euro Adoption

Jose Tavares () and Olga Popova

No 11071, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We analyze individual levels of life satisfaction in Slovakia, after that country adopted the Euro, following a spirited debate. We gauge the psychological cost of transition to the new currency by comparing individual life satisfaction, not only before and after Euro introduction, but by comparison with individuals with similar characteristics in the neighboring Czech Republic, which did not adopt the Euro. Both countries were economically and politically integrated for decades, and share similar macroeconomic indicators just before the currency change in Slovakia. We find evidence of substantial psychological costs of currency transition, which are especially important for the old, the unemployed, those with low education and in households with children. We believe these results suggest the importance of information and enlightened debate before a sweeping change in economic context such as the adoption of a new currency.

Keywords: Euro; Currency transition; Subjective well-being; Czech republic; Slovakia (search for similar items in EconPapers)
JEL-codes: E52 F55 I31 (search for similar items in EconPapers)
Date: 2016-01
New Economics Papers: this item is included in nep-eec, nep-hap, nep-mac and nep-tra
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Citations: View citations in EconPapers (12)

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Journal Article: Psychological costs of currency transition: evidence from the euro adoption (2016)
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