Euro stories: The Irish experience of currency change
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University of Bolton UBIR: University of Bolton Institutional Repository Psychology: Journal Articles (Peer-Reviewed) Psychology 2007 Euro stories: The Irish experience of currency change Rob Ranyard University of Bolton, r.ranyard@bolton.ac.uk Digital Commons Citation Ranyard, Rob. "Euro stories: The Irish experience of currency change." (2007). Psychology: Journal Articles (Peer-Reviewed). Paper 6. http://digitalcommons.bolton.ac.uk/psych_journalspr/6 This Article is brought to you for free and open access by the Psychology at UBIR: University of Bolton Institutional Repository. It has been accepted for inclusion in Psychology: Journal Articles (Peer-Reviewed) by an authorized administrator of UBIR: University of Bolton Institutional Repository. For more information, please contact ubir@bolton.ac.uk.
Euro Stories 1
Running head: EURO STORIES: THE IRISH EXPERIENCE
Euro Stories: The Irish Experience of Currency Change
Rob Ranyard
University of Bolton, UK
Contact details:
Rob Ranyard,
Psychology Department, School of Health and Social Sciences,
University of Bolton,
Deane Rd., Bolton BL3 5AB, UK
Tel: +44(0)1204 903421 Fax +44 (0)1204 399074 e-mail: rr1@bolton.ac.ukEuro Stories 2
Euro Stories: The Irish Experience of Currency Change
Abstract
This paper presents an overview of an interview study carried out in the Republic of
Ireland approximately one year after the introduction of the euro in January 2002, and
also compares the Irish experience to that of the other initial Eurozone countries. The
new currency seems to have been rather more positively received in Ireland than
elsewhere. Irish adults had a generally more positive attitude towards the new currency
and seemed to have adapted to it rather well. Nevertheless, they shared some common
experiences and problems with citizens of other countries, such as the perception that
the introduction of the euro raised inflation more than it actually did, confusion of notes
and coins, and the use of coping strategies involving price conversion to the former
currency. The implications of the Irish experience for policy are discussed.
Key words: Euro changeover; adaptation; Ireland; everyday financial transactions;
interviews
Note: I am grateful for constructive comments from Tommy Gärling and John
Thøgersen as well as an anonymous reviewer.Euro Stories 3
Euro Stories: The Irish Experience of a Change of Currency
The focus of this paper is the Irish citizen’s experience of the euro before and after
its introduction in January 2002. Historically, the UK and Ireland shared the same
currency until the independent Irish punt was established in 1979, although specifically
Irish notes and coins had been introduced much earlier, in 1928. The Irish case is
especially interesting because, of the 12 initial “Eurozone” countries, the Irish punt
(IRP) was the only currency that had a unit value greater than the euro and it was the
currency unit closest to it (1 IRP = €1.27).
The first part of the paper presents an overview of the results of an interview
study conducted in Ireland (see Ranyard, Burgoyne, Saldanha, & Routh, 2005; Ranyard,
Routh, Burgoyne, & Saldanha, 2007, for details), which aimed for an in-depth
exploration of perceptions, feelings and experiences, and how these might have changed
during the first year of adaptation to the euro. The broad aim of qualitative enquiry such
as this is to elucidate ‘the meaning of experience, actions and events as they are
interpreted through the eyes of particular participants, researchers and (sub)cultures and
…. the complexities of behaviour and meaning in the contexts in which they typically
… occur’ (Henwood, 1996, p. 27). As well as being interesting in its own right,
interview evidence on currency adaptation is important in the cross-validation and
triangulation of findings from surveys and experiments such as those conducted by Del
Missier, Bonini and Ranyard (2007), Hoffman, Kirchler and Kamleitner (2007) and
Marques and Dehaene (2004).
In order to place the present interview findings in a broader context, the second
part of the paper relates the Irish citizen’s experience of the euro to that of citizens of
other European countries. To this end, key Eurobarometer survey questions indicating
the degree of adaptation to the new currency are examined. Specifically, Irish responses
one and two years after the euro changeover are compared to those from Italy, Austria
and Portugal. The paper concludes with a discussion of the implications for policy of
this interview and survey evidence.
The Interview Study
Semi-structured interviews were conducted with 24 Irish adults from the Dublin area
varying in age (18 to 75 years), level of education (from minimum schooling to degreeEuro Stories 4
level or higher) and gender. The interviews were carried out approximately one year
after the introduction of the euro, from October 2002 to February 2003, and covered
respondents’ experiences from the period just before the euro’s introduction. The
interview schedule was designed to address four aspects of adaptation to the euro: (1)
attitudes and feelings towards different aspects of the transition; (2) evaluations of
prices in euros together with perceptions and beliefs concerning price rises; (3)
mistakes, slips and lapses in economic transactions in the new currency; and (4)
experience of relearning prices and strategies of adaptation, including the role of
currency conversion. For (3) above respondents were asked whether, since the
introduction of the euro, they had made certain specific mistakes more or less than
before, and whether they could recall specific examples. Fourteen questions, adapted
from the Absent Mindedness with Money scale (Routh and Burgoyne, 1989, 1990),
were posed in a fixed random order. Details of the qualitative analyses of the responses
are presented in the primary reports referred to earlier.
Attitudes and Feelings
Surveys prior to the euro’s introduction found that support for it varied widely from one
country to another, and had increased to 66% overall by 1999 (Ahrendt, 1999). In
Ireland Lambkin (2001) found that in 1997 the public were generally positive about the
proposed euro. A Eurobarometer survey after the euro changeover, in September 2002,
reported that 77% of Irish respondents were very or quite happy that the euro had
become their currency, compared to the average of the Eurozone countries of 53%
(European Commission, 2002a). The interview study elicited further details of how
people felt about the punt, the euro and the changeover.
Prior to the transition some respondents explained how for them the punt had been
a symbol of Irish identity. This is in line with an earlier study of Irish attitudes to the
euro (Lambkin, 2001) and studies of other currencies (Helleiner, 1998; Pepermans,
Burgoyne, & Müller-Peters, 1998). However, the majority of participants did not
express such cultural associations and if anything, were rather indifferent to the fate of
the punt. At the time of interview, only a few respondents expressed regret that the punt
had been consigned to history.Euro Stories 5
Ireland’s decision to adopt the euro marked an important change in the country’s
international position, bringing it closer to continental Europe and establishing some
distance from Britain. Most of the interview respondents saw this in a positive light,
both prior to 2002 and at the time of interview. Also, there were signs in some
responses that the euro was playing a role in strengthening European identity, with
some respondents expressing this quite clearly (“we’re all Europeans now”). Overall,
however, the explanations respondents gave for their feelings about the transition
tended not to mention the symbolic meanings of currencies. This is in contrast to studies
of other countries that changed to the euro, such as Austria (Meier & Kirchler, 2003),
that have found the symbolic aspects of the former national currencies to be rather
salient. We found, however, that Irish respondents focussed on economic factors and
pragmatic aspects of everyday financial transactions. For example, experience of using
the euro in other countries was often mentioned as one of the practical advantages, and
some respondents remarked how quickly they had started to “think in euros”. On the
other hand, perceived price rises, the slide in the euro’s international value, difficulties
with notes and coins and with keeping track of spending, all contributed to continuing
negative attitudes for some respondents.
Euro Price Evaluation
As discussed in other papers in this special issue (Del Missier et al., 2007; Gamble,
2007), the euro illusion is a phenomenon related to the money illusion (Shafir et al.,
1997). Due to differences in nominal values of currencies, the same goods or services
will be rated as less expensive when the money unit is larger. Extending earlier work on
the euro illusion (Gamble et al., 2002), the interview study considered whether prices in
euros were experienced initially as higher than the equivalent price in punts, and if so,
whether this perception persisted. The aim was to distinguish any euro illusion effects
from the tendency for people to believe that currency change in itself causes price
inflation.
When asked about their initial perception of prices or income, respondents’ replies
reflected clear evidence of illusory increases. The majority found that amounts
expressed in euro seemed much higher initially, simply because of the higher nominal
values. At the time of interview, however, no-one felt that euro amounts wereEuro Stories 6
subjectively higher because of the higher numbers involved and illusory increases
seemed to have disappeared. This is consistent with the findings of Del Missier et al.
(2007) who found no evidence for a euro illusion in Ireland in the third year of the euro,
whereas it still persisted in Italy.
Although not experiencing an illusion based on the nominal value of the new
currency, Irish respondents at the time of interview nevertheless tended to insist that
prices had actually risen in the months following the introduction of the euro. The
majority of respondents believed that prices had clearly increased around the time of the
transition. Some attributed this to inflationary pressures generally, not specifically
associated with the euro, but there was a general suspicion that some of the price
increases at the time could be attributed to the changeover. One view was that some
businesses had timed price increases to coincide with the euro in order to hide them, and
another was that some traders had rounded up rather than down. At the time of
interview, most respondents were still convinced that prices were higher than before the
introduction of the euro.
The above concerns were reflected in the Irish media. On January 19th, the Irish
Independent (2002) listed “price hikes” in everything from cell phones to visits to the
Doctor, saying “Welcome to rip-off Ireland.” Concern was so great that the Minister for
Consumer Affairs commissioned a survey to establish whether this was really the case.
This report (Forfás, 2002) concluded that there had not been profiteering on any grand
scale. Furthermore, at the aggregate level, consumer price inflation had not been out of
line with the same period in previous years, though there had been “unusual” price rises
in certain sectors, such as health and other non-traded goods or services where
competition was weak. Despite such evidence to the contrary, beliefs that price
increases followed the euro changeover were widely held across the Eurozone. The
Eurobarometer survey around the same time as the present study found that 82% of
Eurozone respondents believed that the change to the euro had been “rather to the
detriment of consumers” (European Commission, 2002a). Furthermore, other studies
found that perceived inflation and actual inflation began to diverge in all Eurozone
countries after the introduction of the euro and that these gaps persisted for some years
(Aucremanne et al., 2005). It is interesting to note also that surveys prior to theEuro Stories 7
changeover found a widespread expectation that the euro would lead to higher inflation
(for further discussion see Traut-Mattausch et al., 2007; Ranyard et al., 2007).
Difficulties and Errors in Everyday Financial Transactions
With respect to initial difficulties, Kühberger and Keul (2003) found in their
observational study in Austria that most euro transactions in the first week of 2002 were
not noticeably problematic, with only 2.1% of the transactions observed involving a
problem. The Irish respondents reported problems in the first few weeks of 2002,
although most were seen as short-term. Their general feelings about the transition were
positive and that it had gone smoothly. With respect to longer-term errors and
difficulties, previous research has shown that even in relatively favourable contexts
people are prone to make slips and errors in their everyday financial transactions (Routh
& Burgoyne, 1989, 1990). Such slips and lapses had not previously been investigated in
the context of a period of adaptation to currency change when the potential for errors is
likely to be greater. Thus, the present interview study aimed to identify the kinds of
errors and difficulties in everyday financial transactions that Irish people experienced
following the change to the euro. The hope was to be able to distinguish between
routine errors in financial transactions and those that could be attributed to the change of
currency.
At the time of interview, about one year after the transition, problems in dealing
with notes and coins were still being experienced by at least some of the respondents.
Confusing notes and coins was the most frequently reported type of error, and dealing
with all the small change was generally seen as a headache. It should also be noted that
two years after the euro changeover the percentage of people in Ireland who reported
difficulties in distinguishing and manipulating coins was the highest in the Eurozone
(42% compared to the average of 28%).
Other relatively prevalent types of error related to monitoring personal money.
Most respondents reported errors in keeping track of their everyday spending money, as
has been found in previous research (Routh & Burgoyne, 1989, 1990). At least some of
these could be attributable to the problem of dealing with a new currency, for example,
taking less money out of the bank, or finding that money disappeared more quickly than
before. These can be explained as instances of habitual behaviour based on the nominalEuro Stories 8
value of the punt being erroneously continued in the new context. People momentarily
forgot that they were in the new euro-era and seemed to be accidentally “thinking in
punts.” Although there have been no similar studies elsewhere in the Eurozone, this
type of error would be different in other countries because their main currency units
were smaller than the euro (e.g. taking too much money out of the bank rather than too
little).
Currency Adaptation Strategies
Previous research has explored currency adaptation strategies in general and the specific
processes of mental currency conversion and price relearning in a new currency
(Burgoyne et al., 1999; Lemaire & Lecacheur, 2001; Marques & Dehaene, 2004; see
also Lemaire, 2007). The aim in this regard was to explore Irish people’s experiences of
relearning prices and adaptation over an extended time span, especially the role of
currency conversion. The study investigated the strategies Irish people used to adapt to
the euro, including the role of currency conversion and price relearning. It also explored
the changes that took place in strategies of adaptation during the first year.
The changing role of currency conversion was the clearest indicator of the process
of adaptation to the euro. Initially nearly all respondents routinely used mental
arithmetic or their euro converter to compare prices, either to check whether a price had
gone up or to evaluate it relative to a familiar scale. Quite quickly, however, euro
converters fell out of use and mental arithmetic comparisons became selective. In
general, selective comparison was used when prices were high in absolute value, for
example, house prices or annual salaries, and when prices were perceived as
unexpectedly higher, such as an expensive drink in a bar. At the time of interview there
were wide individual differences in this, from some who claimed to never compare
euros to punts and to be thinking completely in euros, to others who said they still
routinely compared and were still thinking in punts. The above pattern of conversion
strategy use is consistent with survey findings 11 months after the euro’s introduction,
discussed in the next section.
Another important aspect of adaptation is the learning of prices in euro. Most
respondents had learned euro prices for at least some of their regular purchases by the
time of interview. The majority, though, felt that they knew the price of a significantlyEuro Stories 9
reduced set of items since the change, mainly those frequently purchased. There was
wide variation, however, with some respondents having acquired a quite limited degree
of price awareness at the time of interview. For these, fully relearning prices in a new
currency may be a lengthy process. The Irish evidence parallels Marques and Deheane’s
(2004) experimental findings on changes in the accuracy of euro price estimation in
Portugal and Austria. In Portugal up to June 2002, accuracy was still below that
observed in the former currency in the year before the euro’s introduction (see also
Marques, 2007). Also, in both countries accuracy was significantly better for frequently
purchased items compared to those purchased less frequently.
It is interesting to compare our findings of Irish people’s experience of conversion
of prices to the former currency and learning prices in the new currency with those of
Hoffman et al. (2007) who investigated the Austrian case. These authors interpreted
their survey evidence in terms of four strategies of adaptation, which differed in the
extent to which they referred back to the former currency when considering euro
amounts. In the conversion strategy, the euro value is converted to the former currency
either by precise calculation or approximately. We described earlier how our Irish
respondents used this strategy. In the marker value strategy, the former currency value
of a few euro amounts is learned and the former currency value of amounts in between
these markers is estimated. Some of Hoffman et al.’s survey respondents reported using
this strategy, which they interpret as part of a process of learning to rescale the whole
money value system to the euro. However, no interview responses could be clearly
interpreted in this way. Rather, we classified expressions that may have reflected
elements of the marker value strategy as instances of conversion, since such expressions
were consistent with an anchoring and adjustment conversion heuristic that avoids
effortful mental calculation and instead retrieves from memory a few specific
conversions. Neither of Hoffman et al.’s other two strategies, the intuitive and the
anchor strategies, involve reference to the former currency. In the former people rely on
a preliminary intuition of euro values, and in the latter they learn a few specific euro
prices, which are used as anchors in evaluating other euro values. Many of the Irish
respondents’ statements about price learning could be interpreted in terms of these
strategies. In conclusion, the present interview responses corroborated the validity of
three of Hoffman et al’s adaptation strategies (conversion, intuition and anchor),Euro Stories 10
although further research is needed to investigate the extent to which people use the
marker value strategy.
Adaptation to the Euro in Ireland Compared to Other Countries
On the whole the Irish respondents seemed to have adapted rather easily to the new
currency. In order to more fully substantiate this, it is useful to compare Ireland with
other European countries, such as Portugal, Austria and Italy, on some measures of
adaptation used in the Eurobarometer survey. Two questions are particularly relevant
measures, with the second being in two parts (European Commission, 2002a, 2002b,
2003, 2004, 2005):
1. It is one year (two years) since we have been using the euro instead of
(NATIONAL CURRENCY). Today, would you say that the euro continues to
cause you a lot of difficulty, some difficulty or no difficulty at all?
2. Today, when purchasing, do you count mentally most often in euro, most often
in (NATIONAL CURRENCY), or as often in euro as in (NATIONAL
CURRENCY) when it concerns:
(a) Exceptional purchases such as the purchase of a car or a house for example?
(b) Common purchases such as day to day shopping.
The first of these questions asks respondents to give a general opinion about their
experience with the euro, whereas the second asks them to reflect on their habitual
mental activity when purchasing consumer items. Figures 1 and 2 compare the total
percentage responses across the Eurozone to these questions, between late 2002 and late
2003 by age group. Figure 1 shows that two years after the introduction to the euro
about half of respondents reported a lot of, or some difficulty, although this was
somewhat lower for the younger respondents (question 1 above). Figure 2 shows the
overall Eurozone percentages of respondents of different ages who said they counted
most often in euro (clearly, a measure of adaptation to the euro). It shows that two years
after the introduction of the euro Eurozone citizens still had some way to go before they
could be said to be fully adapted. Nevertheless, progress can be seen in all age groups
during the second year, particularly in the younger respondents and with respect to
exceptional purchases.
----------- Insert Figs. 1 and 2 about here ----------Euro Stories 11
Responses to these questions indicate wide differences in adaptation across
countries in the first two years after the euro changeover. As Figure 3 shows, the
proportion of Irish respondents reporting that the euro continued to cause difficulties as
much lower than in the other three countries. Figure 4 compares percentages of
respondents claiming to count in euro by country. As may be seen, for common
purchases a large majority of Irish respondents reported counting most often in euro
nearly one year after its introduction, rising to nearly 90% after two years. In contrast,
the corresponding percentages were below 50% for Austrian, Portuguese and Italian
respondents after one year. For the Austrians a large increase can be seen in the second
year, whereas for Portuguese and Italian respondents it actually fell in the second year.
Turning to exceptional items, the percentages of respondents who reported
counting in euro were substantially lower. Only in the Irish sample does the figure
exceed 50%, with the other three being below 20%. Although there was little change in
the Italian and Portuguese cases, both Ireland and Austria showed quite large increases
in the second year. As the figure shows, however, the gap between the Irish and the
other three countries was substantial on this measure of adaptation after two years of
experience with the euro. The gap between Ireland and the Eurozone average was still
very wide in late 2005 (85% compared to 24%) and the clear difference in adaptation in
Ireland compared to Italy was corroborated in the comparative study of biases in price
estimation (Del Missier et al., 2007).
----------- Insert Figs. 3 and 4 about here ----------
Discussion and Policy Implications
It was found that Irish adults had a generally positive attitude towards the new currency
and seem to have adapted to it rather well. Furthermore, Eurobarometer and other
comparisons showed that Irish adaptation was faster than elsewhere. There are a several
possible factors that might contribute to explaining this. One, mentioned at the
beginning, is the closeness between the new and the old currency scales (1 IRP =
€1.27). If this were a major factor, then countries with a similar exchange rate, such as
the UK, would have a similar experience to the Irish if they adopt the euro. A second
factor might be age, since as was found, there is evidence that younger people adapted
better, and the average age of the Irish population is lower than others in the Eurozone.Euro Stories 12
However, policy makers wishing to facilitate a currency transition can do nothing about
this or other demographic factors. On the other hand, they could steer policy to take into
account some other possible factors. First, the initial and continuing generally positive
attitude to adopting the euro in Ireland may have contributed to smooth adaptation, as
might the relatively rapid reduction in the use of conversion to the former currency as a
coping strategy. While the latter is likely to be a consequence of adaptation, the
continued prevalent and persistent use of conversion found in countries such as Italy
may be a barrier to learning euro values. This has implications for policy matters such
as dual pricing: how long should it continue after a changeover?
It was also found that Irish citizens shared some common experiences and
problems with citizens of other countries, including the initial use of coping strategies
involving price conversion to the former currency, confusion of notes and coins, and the
perception that the introduction of the euro raised inflation more than it actually did.
These too have policy implications. With respect to the second of these experiences, a
basic, short-term learning process is obviously necessary, involving recognition of, and
discrimination between, specific notes and coins. However, problems may have
continued because of certain aspects of the design of euro notes and coins. In particular,
the physical differences between some euro notes and euro coins may not be sufficient
to enable the kind of rapid recognition and discrimination necessary for an efficient
currency system. Irish people may have experienced greater difficulties with notes and
coins because their former currency made much greater use in their design of physical
differences, especially size (Bruce et al., 1983). Perhaps such aspects had not been
sufficiently heeded in the euro coin design process. Finally, with respect to the third
common issue mentioned above, perceptions and expectations of higher inflation
following a currency change are clearly deep-seated and policy makers need to
anticipate this. Steps need to be taken, both to protect consumers against unjustified
price increases at a time of uncertainty, and to retain their trust.Euro Stories 13
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Fig. 1. Percentage responding having “a lot of” or “some” difficulty with the euro, by
age group.
60
50
40
Percent
30
one year later
20 two years later
10
0
15-24 25-39 40-54 55 +
Age groupEuro Stories 18
Fig. 2. Percentage mentally calculating “most often in euro” in connection with
common and exceptional purchases, by age group
(a) Common purchases
60
50
40
Percent
30
one year later
20
two years later
10
0
15-24 25-39 40-54 55 +
Age group
(b) Exceptional purchases
25
20
Percent
15
10 one year later
two years later
5
0
15-24 25-39 40-54 55 +
Age groupEuro Stories 19
Fig. 3. Percentage responding having “a lot of” or “some” difficulty with the euro, by
country.
60
50
40
Percent
30
one year later
20
two years later
10
0
Ireland Italy Austria Portugal
CountryEuro Stories 20
Fig. 4. Percentage mentally calculating “most often in euro” in connection with
common and exceptional purchases, by country
(a) Common purchases
90
80
70
60
Percent
50
40 one year later
30
two years later
20
10
0
Ireland Italy Austria Portugal
Country
(b) Exceptional purchases
70
60
50
Percent
40
30 one year later
20 two years later
10
0
Ireland Italy Austria Portugal
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