A Big Mac Test of Price Dynamics and Dispersion Across Euro Area

Economics Bulletin, Vol. 30, No. 3, 2010

14 Pages Posted: 15 Jan 2010 Last revised: 9 Apr 2011

See all articles by Fabio Clementi

Fabio Clementi

Università degli studi di Macerata

Mauro Gallegati

Università Politecnica delle Marche - Faculty of Economics

Antonio Palestrini

University of Teramo

Date Written: January 14, 2010

Abstract

Based on the prices of McDonald’s Big Mac hamburger in 11 Eurozone countries over the 1986-2009 period, the present article investigates whether the adoption of the euro was accompanied by an increase in inflation and how far it affected developments in price dispersion. Our results indicate that the Eurozone inflation rate after the introduction of the euro is on average significantly higher than prior to the changeover. Additionally, we find no evidence of a further significant reduction in price dispersion since the euro switchover in comparison with the previous period during which progress towards a leveling of existing price differentials had been made.

Keywords: Euro, inflation, price dispersion, Big Mac

JEL Classification: E31, F33, F36

Suggested Citation

Clementi, Fabio and Gallegati, Mauro and Palestrini, Antonio, A Big Mac Test of Price Dynamics and Dispersion Across Euro Area (January 14, 2010). Economics Bulletin, Vol. 30, No. 3, 2010. Available at SSRN: https://ssrn.com/abstract=1536700

Fabio Clementi (Contact Author)

Università degli studi di Macerata ( email )

Piazza Strambi 1
62100 Macerata
Italy
+39 0733 258 2560 (Phone)

HOME PAGE: http://docenti.unimc.it/fabio.clementi?set_language=en&cl=en

Mauro Gallegati

Università Politecnica delle Marche - Faculty of Economics ( email )

Piazzale Martelli, 8
60121 Ancona
Italy
++390712207188 (Phone)
++390712207102 (Fax)

Antonio Palestrini

University of Teramo ( email )

Viale Crucioli 122
Via R. Balzarini 1, Località Colleparco
64100 Teramo
Italy

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