The Effects of the Euro-Conversion on Prices and Price Perceptions

Giovanni Mastrobuoni ()

No 101, Working Papers from Princeton University, Department of Economics, Center for Economic Policy Studies.

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.

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)
Date: 2004-09
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Citations: View citations in EconPapers (12)

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Persistent link: https://EconPapers.repec.org/RePEc:pri:cepsud:101

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