The Effect of the Euro on Consumer Prices

The creation of the Economic and Monetary Union in Europe has had large impacts on the global political and economic arena. One of the aspects that is of particular importance for the European consumer is the effect of the euro on the prices. If the introduction of a new currency has meant raised prices it is a matter of real significance that needs to be examined. The following research attempts to analyse the harmonized price indices in seven countries. The purpose is to clarify whether the introduction of the euro has had an impact on the price level in the Member States of the European Union. The indices are presented in diagrams to uncover any deviating change in the indices at the time of the changeover. The findings from the data analysis show that the promised price reductions have not yet occurred and for some categories of consumer products the euro has had an effect on the price level. An effect of the euro is defined as a change in the price level, either increase or decrease, caused by the introduction of the euro. Future members of a monetary union need to establish control mechanisms to prevent raised prices in connection with the introduction of a new currency