Regulating Price Setting at a Currency Changeover and the Problem of Perceived Inflation

Thomas Eife

This paper documents that the impact of the euro changeover in January 2002 on prices was not uniform across the 12 participating countries. There are countries in which prices increased significantly but there are also countries in which price-setting behaviour at the changeover does not appear to be much different from other points in time. The paper argues that this difference can be explained by the way in which the countries regulated price setting at the changeover and that any impact of the changeover could have been avoided with appropriate regulations. The gap between the actual and the perceived impact is addressed and policy recommendations for future changeovers are provided.