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Report
Menu costs at work: restaurant prices and the introduction of the euro
Restaurant prices in the euro area saw an unprecedented increase after the introduction of the euro. We use an extension of commonly used models of sticky prices and argue that the increase in restaurant prices can be explained by menu costs. The extension we use involves the state-dependent decision of firms about when to adopt the euro. Two main mechanisms drive the result. First, our model concentrates otherwise staggered price increases around the introduction of the euro. Second, before the adoption of the euro, prices do not reflect marginal cost increases expected to occur after the ...
Speech
The extended importance of the euro
Remarks before the European Banking Congress, Frankfurt am Main, Germany, November 17, 2006 ; "While the ECB has delivered a currency that retains its purchasing power at least as well as the dollar, there are at least three reasons why the euro is unlikely to displace the dollar as the dominant international currency in the near term. First, the growth prospects of the euro area. Second, the uniqueness of EMU. Third, the benefits of incumbency."
Working Paper
Using vehicle taxes to reduce carbon dioxide emissions rates of new passenger vehicles: evidence from France, Germany, and Sweden
France, Germany, and Sweden have recently linked vehicle taxes to the carbon dioxide (CO2) emissions rates of passenger vehicles. France has introduced a system of CO2-based purchase taxes and subsidies, whereas Germany and Sweden impose annual circulation (i.e., registration) taxes that are linear functions of CO2 emissions rates. This paper (a) compares the effects of vehicle taxes on registrations and average emissions rates across countries and (b) estimates the effect of reducing CO2 emissions rates on manufacturers? profits. The taxes have had a significant negative short-run effect on ...
Journal Article
Is the EMU a viable common currency area? a VAR analysis of regional business cycles
Many commentators are skeptical about the long-run viability of the European Monetary Union (EMU). This article compares the EMU with a well-functioning currency union, the U.S., and finds that they are similar based on key criteria. On the basis of this analysis, the EMU may be as viable as the U.S. monetary union.
Working Paper
Monetary and financial integration in the EMU: Push or pull?
A number of studies have recently noted that monetary integration in the European Monetary Union (EMU) has been accompanied by increased financial integration. This paper examines the channels through which monetary union increased financial integration, using international panel data on bilateral international commercial bank claims from 1998-2006. I decompose the relative increase in bilateral commercial bank claims among union members following monetary integration into three possible channels: A "borrower effect," as a country's EMU membership may leave its borrowers more creditworthy ...
Working Paper
An estimate of the measurement bias in the HICP
This paper provides an estimate of the measurement bias in the Harmonised Index of Consumer Prices (HICP) that the European Central Bank uses to define price stability in the euro area. The estimate is based on a comparison of the rate of increase in consumer prices as measured by the HICP and the responses to a question about recent changes in the cost of living on the European Commission?s monthly Harmonised Consumer Survey (HCS). I find that the HICP may overstate the true rate of inflation by about 1.0 to 1.5 percentage points a year.
Speech
The internationalization of national currencies, speech at the Comenius European Banking and Financial Forum, Czech National Bank, Prague, Czech Republic, March 27, 2007
President Pianalto discusses the characteristics of international reserve currencies and the benefits that a country - or a region such as the Eurozone - can enjoy if its currency fulfills that role. She concludes with comments on why global currency competition provides an incentive for central banks to pursue and preserve price stability.
Newsletter
What is the role of public authorities in retail payment systems?
On June 21?22, 2010, the Chicago Fed and the University of Granada co-sponsored a conference that brought together policymakers, academics and industry practitioners to discuss evolving retail payment systems and the role of public authorities, with several panels focusing on the Single Euro Payments Area.
Newsletter
The Cyprus crisis through the lens of bank investors
Last year, Cyprus joined its neighbor Greece on the list of eurozone countries in financial crisis. Although Cyprus is one of the smallest economies in the euro area, following the announcement of the official financial aid package for Cyprus on March 16, 2013, bank investors in the rest of the eurozone suffered large losses. Our analysis indicates that bank investors interpreted the Cypriot aid package as potentially forming a template for future eurozone bank restructurings, whereby bank investors would bear a higher fraction of the resolution costs. .