The “Euro Illusion”: Illusion or Fact?

The changeover to the euro elicited an upsurge of research on the effects of the new currency on consumers’ conversion strategies, price estimates, price evaluations, choices, and purchases. This research includes longitudinal surveys, interviews, and controlled experiments, both natural and in the laboratory. The present article starts with an overview of this research after which it more specifically focuses on research showing an influence of the nominal value, as expressed in different currencies, on price evaluations and consumer choice. For most countries, the transition to the euro led to a lower nominal value currency. A bias known as the “euro illusion” has been documented such that the subjective value of money is influenced in the direction of the nominal value (i.e., in most countries prices and salaries seem smaller when expressed in euros than in the old domestic currency). Although the term was coined in connection with the euro changeover, the nominal representation of a currency has been shown to influence the subjective value of money in unfamiliar currencies other than the euro. Thus, tourists travelling abroad may frequently be subject to such an illusion. Different mechanisms have been proposed to account for the euro illusion. One is the numerosity heuristic and another the anchoring-and-adjustment heuristic in conjunction with biased conversion strategies. The size of the euro illusion is influenced by trade-offs between accuracy and effort. Consistent with this hypothesis, task importance, time constraints, familiarity with the conversion strategy, complexity of the conversion strategy, mood, and attitude towards the country or the currency all influence the size of the euro illusion.     

The concept of near money in loyalty programmes

Loyalty reward schemes often have their own currency, for example, frequent flyer miles, which is a form of near money or quasi money. In a variation of earlier work by Snelders et al. (1992), when examining both New Zealand (Study 1) and Hong Kong (Study 2) residents, respondents provided typicality ratings, similarity ratings, and answers and reaction times to the question “Is X a type of money?” for examples of money, near money and objects of value. The results from both studies showed that near money is conceptualised in a way that is like but distinct from legal tender. Two further studies investigated implications of this conceptualisation. Study 3 found that preferences for spending near money were influenced by the ostensible purpose of the currency, and Study 4 showed that near money seemed to be placed outside of regular legal tender mental accounts.     

Some evidence on the role of money illusion in labor supply behavior

The Keynesian idea that workers are subject to money illusion in their labor supply decisions is tested by estimating a labor supply function that includes the price level as an independent variable. The model is estimated with data drawn from various BLS publications and is aggregated by SMSA. The results indicate a significant negative supply response to price-level changes after controlling for the nominal wage rate, income, and the SMSA's unemployment rate. There is no significant difference between workers' supply response to the price level and the nominal wage rate, which suggests that workers are not subject to money illusion.     

The subjective valuation of coins and bills

There is more to how individuals value money than just the denomination, based on several recent research articles. Could the very form of money, whether paper or metal, be a basis for such subjective valuation? A theoretical explanation based on the representativeness bias is explored and three experimental studies are employed to investigate this question. The results show that there is a bias in how the value of money is assessed based on whether that money is comprised of coins or bills. Bills are estimated to have more purchasing power than coins for the same objects, including for a different currency where a specific exchange rate is given. Copyright © 2014 ASAC. Published by John Wiley & Sons, Ltd.     

Currency competition in a fundamental model of money

We study how two fiat monies, one safe and one risky, compete in a decentralized trading environment. The currencies' equilibrium values, their transaction velocities and agents' spending patterns are endogenously determined. We derive conditions under which agents holding diversified currency portfolios spend the safe currency first and hold the risky one for later purchases. We also examine when the reverse spending pattern is optimal. Traders generally favor dealing in the safe currency, unless trade frictions and the currency risk is low. As risk increases or trading becomes more difficult, the transaction velocity and value of the safe money increases.     

金融全球化时代国家货币的命运:过去、现在与未来

主权意义上的国家货币是近代历史的产物。在19世纪,经济民族主义、国内统一市场、军事财政改革、新工业技术共同建构出现代国家货币。而金融全球化冲击着国家货币与货币主权,呈现出一个市场,一种货币的时代特点。这一特点的根源仍然在于国家货币的历史结构。但是,国家货币仍将在未来相当长的一段时期内是国际货币格局的主导形态。     

浅谈现代饭店业外汇风险管理

我国加入WTO后,旅游事业呈现了蓬勃发展势头。良好的经济形势在给饭店业带来无限商机的同时也带来了外汇收支管理等问题。尤其是现代饭店业面临着外汇交易、外汇借款、汇率折算等风险。应全面掌握国际市场主要货币汇率、收支状况,正确选择外币币种,适当调整商品价格,采用外汇保值条款等手段加强饭店业外汇管理,减少外汇风险,提高饭店经济效益。     

ANFA – nationale Geldschöpfung als Sprengsatz für die Währungsunion?

The so called ANFA secret protocol brought to the public’s attention the previously only little noticed opportunity for national central banks of individual Eurozone members to create money through purchases of securities at their own expense. The ANFA financial assets amount to the significant share of 51% (gross) or rather 18% (net) of the Eurosystem’s balance sheet total and 41% of its total liquidity, thereby jeopardising the principle that the communities of the emitting and the money accepting countries should be congruent, which is seen as a stability condition for currency unions. There is a danger that the money creation via ANFA acts as an explosive device for the currency union. It is therefore necessary to clearly limit the own funds portfolio in order to restore the community of money emission.     

基于微观视角的人民币国际化障碍分析

一国的货币国际化首先是市场自由选择的结果。人民币国际化进程迟滞于中国外贸、金融发展的主要原因,并得出当前阶段中国应主要通过增强外贸企业国际竞争力、稳定人民币币值、完善金融市场三大途径以提高人民币国际化水平的结论。     

RE‐EXAMINING THE IMPLICATIONS OF THE NEW CONSENSUS: ENDOGENOUS MONEY AND TAYLOR RULES IN A SIMPLE NEOCLASSICAL MACRO MODEL

This paper re‐examines the impact of endogenous money in a neoclassical model with interest‐sensitive expenditures. It first outlines a benchmark model with exogenous money and the usual full employment and money growth‐determined inflation results. It then replaces exogenous money with endogenous money, which is shown to generate model indeterminacy. Two methods of resolving this indeterminacy are then explored: money illusion and a Taylor rule for monetary policy, a key feature of new consensus models. The paper concludes that endogenous money has negative implications for the behaviour and interpretation of neoclassical and new consensus models.     

中国单一货币供给规则

中国货币供应量和经济目标相关程度高,具有较好的可测性、可控性;在中国实行有规则、透明度高、连贯性强的单一货币规则是可行的;严格执行货币供给量与相关经济目标挂钩的数量型货币政策,有助于确保物价稳定和经济平稳增长。     

The Socio-Political Dimensions of the Currency: Implications for the Transition to the Euro

In the first section of this paper, the author demonstrates the crucial significance of anchoring symbolically a currency in the representation of a social whole, not least when practical and technical problems bound up with the creation of a new unit of account and the associated means of payment have to be addressed. In the second section of the paper, on the basis of this analysis, a number of practical implications for the transition to the euro are drawn. The analysis starts with the irreducible political and social dimensions of money related to its traditional public functions. The differentiation of modern societies gives to national currencies a regulatory role in insuring the social bond, as the same currency must be accepted in the public economy as well as in the private one. A series of conditions of legitimacy and confidence in the currency can then be drawn from its participation in the social regulation. To achieve legitimacy, every currency must on the one hand be an instrument that can provide the necessary credit for the development of production and trade and allow people to pay their debts to the public authorities, but it must also serve as a symbol of political belonging to a community. This last dimension of the currency is very often overlooked precisely because it is taken for granted. It is these political and symbolic dimensions of money which the transition to the euro now puts squarely on the centre stage.     

Die aktuelle Kritik an der makroökonomischen Geldtheorie

There is no universal agreement on what money actually is. Money is created and used by the modern bank system, which can be split into the central bank, the commercial banks and the remaining sector of households, companies and states. The article focuses on bank deposits, which are created by commercial banks themselves. Bank deposits count as money in a modern economy such as Germany, where the bulk of money held by the public is in the form of deposits with banks. The other part is currency — bank notes and coins. Not accessible to the public (with some exceptions) are central bank reserves held by commercial banks with the central bank. There are two main problems which are currently being discussed by the Deutsche Bundesbank and by some more or less academic authors. First, what kind of relationship exists between base money (currency and reserves) and bank deposits? This relationship plays a crucial role in controlling and steering inflation and investment. Second, are banks lending the savings of their customers to other customers? This relationship is a cornerstone of the money multiplier theory. The answers to these two questions are not as trivial as they seem to be. Textbooks are of no help because they are the targets of the criticism made by central bank authors.     

ANFA — National Money Creation as an Existential Threat to the Currency Union?

The recent publication of the previously secret Agreement on Net Financial Assets (ANFA) directed the public’s attention to the possibility that national central banks could create money through purchases of securities on their own account. This paper provides an overview of the legal foundations for ANFA and shows the varying extent to which the member countries use these regulations. What are the interests, risks and consequences for the countries in crisis and the currency union as a whole? Is the ECB properly monitoring ANFA purchases? Could money creation via ANFA act as an explosive device for the currency union?     

基于电子商务的网络虚拟货币研究

网络虚拟货币是网络经济下的一种新型货币形式,是解决网上小额支付问题的理想模式之一。随着电子商务的迅猛发展,网络虚拟货币在网络经济活动中发挥着越来越重要的作用。本文着重分析了网络虚拟货币的电子商务特征、功能、生存方式及其发展困境,并就其当前所遇到的问题,提出了相应的对策。     

产能过剩与增长型衰退的货币责任——以房地产和光伏产业为例

货币投入对经济社会所具有的促进作用,是有利的货币供给冲击;而货币在短期内受高收益率的引诱而持续流入某个产业,导致该产业由产能过剩逐渐转向增长型衰退,就是不利的货币供给冲击。前者是货币的正面责任,后者则归于货币的负面责任。货币作为社会生产关系的产物,货币内在的社会性就要承担社会责任：中央银行应当在产业结构调整、治理产能过剩等方面制定和实施货币政策,对货币供给＂引导与控制＂;商业银行的贷款决策要警惕某些产业短期的高收益率,以规避引诱货币流入出现的＂信用繁荣＂;社会公众理性的投资行为,不仅能够获得合理稳定的投资收益,也是维护金融市场和货币体系秩序的内在要求。     

The Euro Illusion in Consumers’ Price Estimation: An Italian–Irish Comparison in the Third Year of the Euro

The euro illusion is a transient phenomenon that consists of currency-related asymmetries in the intuitive judgment of product prices made by consumers. The results of a cross-country study in the third year after the introduction of the euro show a strong price estimation asymmetry in a country with an extreme exchange rate (Italy) and a weaker effect in a country in which the nominal values of the new and the old currency are much closer (Ireland). These results rule out proposed explanations of the euro illusion in price estimation that assume the sole influence of plausible anchors (reference prices stored in memory within the plausible price range), supporting instead accounts also endorsing the role of implausible anchors (reference prices outside the plausible price range). Beyond contributing to our theoretical understanding of the euro illusion, this research starts to unveil the interplay between structural factors (i.e., the currency exchange rate) and psychological mechanisms that produce long-lasting difficulties for consumers after a monetary changeover.

Interaction effects of mood induction and nominal representation of price on consumer choice

The transition to the euro in several European countries causes consumers to make mistakes in economic transactions. One mistake referred to as the “euro illusion” is the tendency to evaluate prices on the basis of their nominal representation, thus overestimating or underestimating how expensive products are. Investigating effects of the euro illusion on consumer choice as well as moderating effects of mood, three laboratory experiments were conducted employing convenience samples of students. In Experiment 1 a bias toward the nominal representation was demonstrated when participants chose an unfamiliar (fictitious) large-unit currency (small numbers) for paying the price of a consumer product but chose an unfamiliar small-unit currency (large numbers) for obtaining a salary. The bias was larger for participants who were induced to feel positive and deactivated (calm and relaxed) than for participants who were induced to feel negative and activated (anxious and jittery). The difference in frequencies of choice of currency were replicated in Experiment 2. No effects were, however, found of natural mood assessed by self-report ratings. In Experiment 3 choices of more expensive consumer products with additional features were more frequent when the prices were expressed in the large-unit currency than when expressed in the small-unit currency. Neither in this case did self-reported natural mood affect the choices.     

Forecasting Real Inventories and the Anomaly of Money Illusion

While the transmission mechanism of inventory behavior in the business cycle has been studied, less effort has been devoted to applied forecasting of inventory change. Inventory fluctuations have accounted for a sizable portion of the changes in U.S. GDP during recessions over the past fifty years. In this paper, we report on out-of-sample forecasts of manufacturing and trade inventories generated by regression and neural network methodology. Our forecasting model is Metzlerian in approach, in that the divergence between actual and targeted sales is hypothesized as the primary cause of inventory imbalance. Our forecasts also rely on the slow adjustment of inventory investment to sales surprises. However, the likely presence of money illusion is a caveat to users, and we address several distortions it introduces to inventory management measures.     

论市值

市值大小影响本国货币的币值,币值变化也要影响到市值.在成熟的股票市场,市值的表现应是相对稳定的.在市值能够稳定的基础上,市值才能够逐渐增升.正常的市值跌落是由于货币升值,不正常的市值跌落会进一步地推动货币贬值.当股票市场出现了不正常的市值跌落.可以迅速地膨胀某些人的财富.中国股市的市值终将要强劲增升,因为中国经济进入工业化腾飞阶段后的高速发展,会引起价格随之上涨,货币随之贬值,于是市值相应必然增升.