6/2014 Tairi Rõõm and Katri Urke. The Euro changeover in Estonia: Implications for inflation

Working Papers of Eesti Pank 6/2014

Estonia changed over from the kroon to the euro in January 2011. This paper analyses the inflationary effect of this event. The analysis is based on the Harmonised Indices of Consumer Prices. The difference-in-differences method is employed where the treated group is Estonia and the control group consists of the other EU member states. The estimation results imply that the inflationary impact of the euro changeover was either insignificant or small in magnitude, depending on which treatment period is considered. The acceleration in inflation mostly occurred in the second half of 2010, during the six-month period prior to the adoption of the euro. Although the actual effect of the euro changeover on inflation was modest, most Estonian citizens felt that the introduction of the new currency increased consumer prices considerably.

JEL Codes: D49, P46, E58

Keywords: euro, currency changeover, consumer prices, inflation

Corresponding author's e-mail address: tairi.room [at] eestipank.ee

in new window

The views expressed are those of the authors and do not necessarily represent the official views of Eesti Pank