One Currency, One Price? Euro Changeover-Related Inflation in Estonia

Abstract: This article investigates euro changeover-related inflation using disaggregated price-level data. The differences-in-differences approach is used, and the control group for the treatment country, Estonia, is built from 12 eurozone countries. The Nielsen Company disaggregated price data are employed at product, brand and shop-type levels. The results indicate that while the overall inflationary effect of euro adoption was modest, the effects were significantly different across various market segments. Changeover-related inflation was higher for products that were relatively cheaper than the eurozone average. Inflationary effects were stronger in smaller shops.