Did the Introduction of the Euro Lead to Money Illusion? Empirical Evidence from Germany

Bittschi, Benjamin and Duppel, Saskia (2015) Did the Introduction of the Euro Lead to Money Illusion? Empirical Evidence from Germany. ZEW Discussion Papers 15-058, 23 p.

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Abstract or Table of Contents

Using the introduction of the euro as a natural experiment, we provide economy-wide evidence for money illusion based on declared donations from German administrative income tax data. Our results suggest a magnitude of the money illusion effect between 2.4% and 7.6%. Compared to previous studies on money illusion in the course of the euro currency changeover this effect size is significantly lower. We trace this back to the more comprehensive donation data in our study compared to hitherto studied face-to-face collections, which makes our results less prone to "power of the ask" and social pressure effects.

Item Type: Discussion/ Working Paper (Unspecified)
Additional Information (public): Provided in Cooperation with ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research
Keywords: Money Illusion, Euro Introduction, Charitable Giving, Natural Experiment
Classification Codes (e.g. JEL): D12, E03, E40
Research Units: Divisions > Former Research Groups > Macroeconomics and Public Finance
Status: Published
Date Deposited: 06 Oct 2017 08:14
Last Modified: 06 Oct 2017 08:14
URI: https://irihs.ihs.ac.at/id/eprint/4364

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