Did prices really soar after the euro cash changeover? Evidence from ATM withdrawals

Abstract

As described in chapter 1 of this book, there is a widespread perception among the citizens of the euro area that the introduction of the euro notes and coins in the first months of 2002 spurred a rise in prices that was much sharper than measured by the national statistical offices (see also European Central Bank 2002b, 2003a and 2003b). This phenomenon has been the subject of countless newspaper articles and of several official speeches by policymakers and politicians and the perception that the euro brought about price increases is still vivid.²

In May 2002 Prof. O. Issing gave a speech in Mainz on “Der Euro - eine stabile Währung”. After the speech, the first question from the audience was about the “teuro” phenomenon. Seeing the look of disbelief with which his explanation was met, Issing replied: “You seem not to believe me. And even my wife doesn’t believe me”. This sentence found wide coverage in the German press. Two years later, President Trichet still deemed it necessary to reassure European customers on this issue: “European citizens who still perceive that inflation is higher than measured by official indices should be assured that the official measures are accurate and that we will continue to maintain price stability in the future” (ECB Introductory Statement after the Governing Council meeting of April 2004).