Menu costs at work
Subtitle: restaurant prices and the introduction of the Euro
By: Bart Hobijn, Federico Ravenna, Andrea Tambalotti.
Contributors: Ravenna, Federico.; Tambalotti, Andrea, 1973-; Federal Reserve Bank of New York.
Series: Staff reports ;; no. 195; Staff reports (Federal Reserve Bank of New York : Online) ;; no. 195.
Publisher: Federal Reserve Bank of New York
Published: 2004
Place of publication: [New York, N.Y.]
Language: eng
Format: Electronic resource
Subjects: Restaurants -- Prices -- European Union countries.; Food service -- Prices -- European Union countries.; Euro.
Other titles: Restaurant prices and the introduction of the Euro
Description: "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 changeover.  This horizon effect disappears as soon as the new currency is adopted, contributing to a jump in prices at that time.  For realistic parameter values, the model generates a blip in inflation of the same magnitude observed in the data"--Federal Reserve Bank of New York web site.
Notes: Includes bibliographical references.
Title from PDF file as viewed on 1/11/2005.
System requirements: Adobe Acrobat Reader.
Mode of access: World Wide Web.