Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/97200
Authors: 
Meyer, Sophie-Charlotte
Schettkat, Ronald
Year of Publication: 
2013
Series/Report no.: 
Schumpeter Discussion Papers 2013-005
Abstract: 
Analyzing prices of truly homogenous consumer goods sold in Euroland, we find significant price convergence after the Euro cash changeover in 2002. The deviation of national log prices from the mean log price of the same product is much narrower with the Euro than before. We observe Sigma and Beta convergence, i.e. prices do not differ systematically between countries. Our result is in contrast to some other findings stating divergence rather than convergence but which do not control perfectly for heterogeneity of products. Because of information and transportation costs arbitrage is unlikely to occur in consumer items and reasons for convergence must therefore be sought in competition and advantages on the supplier's side. If suppliers would minimize menu costs, price for the same item should be identical, which we do not observe.
Subjects: 
convergence
price setting
law of one price
Euro
homogenous products
JEL: 
D4
E31
F36
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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