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Rounding and “anomalous” changes in Italian consumer prices in 2002

In: The Euro, Inflation and Consumer’s Perceptions

Author

Listed:
  • Franco Mostacci

    (ISTAT)

  • Roberto Sabbatini

    (Bank of Italy)

Abstract

One of the main concerns before the euro cash changeover was that the rounding of prices in the new currency would be mainly upwards, increasing consumer price inflation (European Central Bank 2002). Community rules called on economic agents to convert and round prices to the nearest cent,2 but this could not rule out the possibility that the changeover would have an adverse impact on prices, in connection with the likelihood that rounding to what vendors considered “attractive” prices in euros would be mainly upward. In the run-up to the changeover there was a concern that the switch might give merchants the chance to raise their prices, though it was believed that the neutrality of the redenomination and the operation of market forces would ward off such effects. Empirical studies by central banks and statistical institutes during 2001 showed that the proportion of attractive prices in the national currencies was quite high, confirming the risk that from January 2002 there might be a significant inflationary impact from euro price rounding.

Suggested Citation

  • Franco Mostacci & Roberto Sabbatini, 2008. "Rounding and “anomalous” changes in Italian consumer prices in 2002," Springer Books, in: Paolo Giovane & Roberto Sabbatini (ed.), The Euro, Inflation and Consumer’s Perceptions, chapter 2, pages 51-69, Springer.
    • Handle: RePEc:spr:sprchp:978-3-540-78370-1_3
    DOI: 10.1007/978-3-540-78370-1_3
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