In search of a euro effect

Parsley, David; Wei, Shang Jin

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In search of a euro effect

Date

2008

Authors

Parsley, David

Wei, Shang Jin

Abstract

Was the adoption of the euro accompanied by an increase in prices? Did it promote goods market arbitrage in the form of faster convergence to a common price? By comparing the experience of eurozone countries to non-euro European countries in a 'difference-in-differences' specification, we net out effects on prices unrelated to the euro. We find neither evidence of significant price increases associated with the euro, nor evidence of a significant improvement in market integration.