Working Paper: CEPR ID: DP11071
Authors: Vladimir Otrachshenko; Olga Popova; Jos Tavares
Abstract: We analyze individual levels of life satisfaction in Slovakia, after that country adopted the Euro, following a spirited debate. We gauge the psychological cost of transition to the new currency by comparing individual life satisfaction, not only before and after Euro introduction, but by comparison with individuals with similar characteristics in the neighboring Czech Republic, which did not adopt the Euro. Both countries were economically and politically integrated for decades, and share similar macroeconomic indicators just before the currency change in Slovakia. We find evidence of substantial psychological costs of currency transition, which are especially important for the old, the unemployed, those with low education and in households with children. We believe these results suggest the importance of information and enlightened debate before a sweeping change in economic context such as the adoption of a new currency.
Keywords: currency transition; Czech Republic; euro; Slovakia; subjective wellbeing
JEL Codes: E52; F55; I31
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| euro adoption (F36) | individual life satisfaction (I31) |
| euro adoption (F36) | individual satisfaction with economic situation (D12) |
| euro adoption (F36) | psychological costs (D91) |
| individual characteristics (Z13) | individual life satisfaction (I31) |
| euro adoption (F36) | satisfaction decrease among vulnerable groups (I14) |