Bank of Lithuania
The Effect of the Euro Changeover on Prices: Evidence from Lithuania
2021-10-12

The Effect of the Euro Changeover on Prices: Evidence from Lithuania

The Effect of the Euro Changeover on Prices: Evidence from Lithuania
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At the aggregate level, I find that the euro changeover did not lead to a significant change in the overall inflation rate between 2015 and 2019 in Lithuania. When the measures are diversified, however, some inflationary effects emerge in sub-categories. I therefore analyze this heterogeneity at the disaggregated level using a large sample of prices that constitutes the CPI from 2010 to 2018. I show that significant price changes have been confined to the low-weighted components of the HICP. This explains why a spike in the overall price level did not occur at the time of the changeover.

Keywords: Euro changeover, synthetic difference-in-differences, regression discontinuity in time, price changes.

JEL codes: E31, F33, L11.

The views expressed are those of the author(s) and do not necessarily represent those of the Bank of Lithuania.

Euro changeover, synthetic difference-in-differences, regression discontinuity in time, price changes