Speed of Euro Adoption
20 Pages Posted: 28 Feb 2007 Last revised: 19 Jan 2009
Date Written: February 1, 2007
Abstract
This paper estimates the speed and determinants of euro adoption across Italian provinces by exploiting the natural experiment in early 2002 when euro and lira dually circulated as legal tender. A unique data set with daily observations on the net flows of euro banknotes from the branches of the Bank of Italy, province by province, is built and used. The diffusion of the euro differs across Italy, being faster in the Northern regions and slower in the Southern regions and in the Islands up to the beginning of February. The speed of euro adoption is influenced by the availability of transaction technology and by demographic characteristics, but it is not influenced by literacy and criminality levels. Lessons on the design of the transition to a new currency are obtained.
Keywords: demand for money, financial innovation, payment economics, speed of euro adoption
JEL Classification: E41, E51
Suggested Citation: Suggested Citation