Euro Stories: The Irish Experience of Currency Change

This paper presents an overview of an interview study carried out in the Republic of Ireland approximately 1 year after the introduction of the euro in January 2002 and also compares the Irish experience to that of the other initial Eurozone countries. The new currency seems to have been rather more positively received in Ireland than elsewhere. Irish adults had a generally more positive attitude towards the new currency and seemed to have adapted to it rather well. Nevertheless, they shared some common experiences and problems with citizens of other countries, such as the perception that the introduction of the euro raised inflation more than it actually did, confusion of notes and coins and the use of coping strategies involving price conversion to the former currency. The implications of the Irish experience for policy are discussed.     

Endogenous OCA Analysis and the Early Euro Experience

Some have argued that the endogenous responses to the formation of a currency area are so strong that one need not worry about optimum currency area conditions ex ante. We argue that this is much too strong a conclusion. We draw on a number of recent studies to evaluate the endogeneity experiences of the eurozone in three major areas; trade flows, business cycle synchronisation and structural reforms to improve labour and product market flexibility. Simple before‐and‐after comparisons are insufficient for analysis of endogeneity. The experiences of non‐euro Western European economies suggest that broader trends also had considerable influence on trade and business cycle patterns. While trade rose substantially within the eurozone, it also rose with and among other European economies. We argue that political economy considerations tend to dampen the magnitude of endogeneity efforts on structural reforms and that meeting conditions for entry may be a more powerful mechanism in this than are subsequent endogenous responses. We also discuss a number of areas for further research.     

The UK and the Euro: Debating the British Decision

This article seeks to inform and enliven the debate on whether or not Britain should join the euro. The central focus of the article involves interviews with two leading economists, Professor Willem Buiter (Chief Economist and Special Counsellor to the President, European Bank for Reconstruction and Development) who strongly supports the case for joining, and Professor Patrick Minford (Professor of Applied Economics, Cardiff Business School) who takes the opposite stance. The article begins with an introduction which places the interviews in context and concludes with a final section summarising the central points of commonality and departure arising in the interviews with Professors Buiter and Minford.     

The adjustment mechanism in the Euro Area

This paper analyses the adjustment mechanism in the euro area prior to the crisis. Results show that the real exchange rate adjusted to redress cyclical divergences and that after monetary unification, real exchange rate dynamics became less reactive to country-specific shocks but also less persistent. Regulations affecting price and wage nominal flexibility and employment protection play a role in the adjustment mechanism. Indicators of product and labour regulations appear to matter for both the reaction of price competitiveness to cyclical divergences and for the inertia of competitiveness indicators.     

The Transition to the Euro: Some Perspectives from Economic Psychology

The reactions of EU consumers to the arrival of the euro are likely to be far more complex than people's typical pragmatic and expedient adaptations to everyday economic change. This article discusses the major problems and psychological issues that are likely to arise in domains where the euro can be expected to have a major impact. More specifically, the domains considered include the following: the symbolic meanings of money; learning, remembering and information- processing; judgement and decision-making; expectations, concerns, and beliefs of EU citizens (consumers); and, propaganda, communication and attitude change. The article concludes with a number of tentative policy recommendations.     

Greece and the Euro: The chronicle of an expected collapse

Ten years after Greece’s accession to EMU, the venture has proved to be almost a complete failure. Obviously, the country joined EMU disappointingly unprepared. After EMU accession, Greece failed to seek the necessary adaptations. Its economic policy was inconsistent with the economic logic and rules of the game of a monetary union. EMU did not in itself lead to the Greek crisis. Nevertheless, the supervisory arrangements clearly failed to work. Moreover, the unfolding of the crisis was assisted by EMU’s inherent weakness in managing asymmetric disturbances and the absence of early warning and rapid intervention mechanisms.     

哇,欧元涨了……

“哇，最近欧元涨了，升得好厉害……”在上海度假三个月回到法国的Lisa刚放下行李就打长途电话回家报平安，并把这个下飞机后的最大发现报告给了家人。欧元兑美元汇率的蹿升，也牵动着许多居民的神经，尤其是想去欧洲留学、旅游的人，汇率的影响又将怎样?     

任务艰巨的欧元转换

今年年底要把新货币欧元送到近3亿的欧洲人手中--这对欧盟各国中央银行、商业银行和商人而言,是一个极大的物流上的挑战.重兵把守的运输车辆,私营保安公司和警方,正严阵以待地将数十亿欧元运送到欧洲各国,尽可能防范对欧元抢劫和偷窃活动发生.为了让所有欧盟居民了解欧元,欧洲央行已经投入4千万欧元进行宣传.     

The Outlook for the Euro Changeover: A Summary and General Analysis

In this paper, the procedures and problems of the changeover to the euro are reviewed. The legal elements involved are discussed as are the psychological aspects. Various practical problems and proposed solutions are described. The possibility of resistance from the consumers in certain segments of the Member State populations is also addressed. One reason for any such resistance might be that for many citizens, the change of currency appears to have little bearing on their everyday concerns.Particular attention is devoted to the scenario for the period 1 January to 1 July 2002, during which coins and notes in euros and national monetary units can be in circulation at the same time.     

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 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.     

The Euro as a Political Communication Process: Quality Requirements

After briefly describing the situation with respect to how the changeover to the euro is seen in Spain, the author discusses the process of political communication linked to the introduction of the new currency. Various elements that are constitutive of a successful communication process are outlined. Particular emphasis is put on the need for those who dispense information about the euro to establish their credibility. Opinion leaders can be expected to play a major role in the communication process. Among other things, a system of "euro-watch centres" is proposed as a way of enhancing the quality and the vigilance of the two-way communication between governments and consumers.     

The US Dollar and the Euro as International Currencies

For many decades the US dollar has remained unchallenged as the world’s dominant international currency. What is behind its persistent pre-eminence in the international monetary system and can this be expected to last? Could the euro rival or even surpass the dollar as the leading currency? If it did, what would be the consequences for Euroland?      

The Euro Changeover and the Factors Influencing Perceived Inflation

The most flamboyant economic effect of the euro changeover on consumers was a dramatic increase in perceived inflation. To directly measure perceived inflation, Brachinger developed a new index of perceived inflation (IPI). This index is based on some hypotheses about factors influencing perceived inflation. An experimental study is presented which investigated the influence of two of these hypothesized factors, purchase frequency and loss aversion, on individual judgments of price changes. Furthermore, two additional factors have been included that are informative with respect to the IPI, product segment and price level. Judgments of inflation were assessed with three methods, yielding different results. Empirical evidence for the hypotheses was obtained.      

The Impact of the Euro Changeover on Between-Currency Conversions

The present paper reviews available data about between-currency conversion strategies. Specifically, it compares conversion-strategy repertoires and execution before the euro changeover and 5.5 years thereafter. The data illuminate what between-currency conversion strategies people use, how they execute and select among them, why some strategies are favoured over other strategies, how long after the euro changeover people need to do conversions. These findings have important consequences for understanding how consumer behaviour may be facilitated by improving between-currency conversions, a key component for a successful currency changeover. This work was supported by grant from the Agence Nationale de la Recherche (Grant # 06-2-235061).     

Coming home to Europe: Greece and the Euro

The European Council’s recent decision that Greece is ready to join EMU at the beginning of 2001 raises a number of questions. How was Greece able to comply with the convergence criteria? What are the costs and benefits of its accession from both the Greek and the present EMU members’ perspectives? Is the current process of economic reform in Greece sustainable?     

Sourcing in an Increasingly Expensive China: Four Swedish Cases

China has long enjoyed its position as the world’s cheapest production country. However, this position is being shaken due to the increasingly rising costs in China in pace with China’s rapid economic development. China’s New Labour Contract Law which took effect from 1 January 2008 has further pushed the labour costs in China in general. The purpose of this article is to arrive at an in-depth understanding of why foreign firms conduct sourcing in China where sourcing is becoming increasingly expensive. The experiences of four Swedish companies in the textile and clothing industry (TCI) conducting sourcing in China are presented. Our findings show that sourcing in China is becoming both cost- and strategy-driven. Companies purely chasing the cheapest production would most probably consider leaving China, whereas companies with a long-term strategic intent and a high level of business ethics and corporate social responsibility (CSR) practices will retain all or most of their sourcing activities on the Chinese soil despite the rising costs.