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Economic Interests and Public Support for the Euro
Unformatted Document Text:  11 Although the effective inflation range in the pooled data is limited given the convergence criteria, inflation ranges between .8 and 5.1. Therefore, the potential impact of prices on support is sizable. The change in the exchange rate of the euro, as was the case in the earlier study, is also a strong predictor of support. Our previous analysis demonstrated that a strong national currency was linked to lower levels of support while the current analysis shows that the strength of the euro against the U.S. dollar boosts support. We were concerned that the exchange rate, as it varies only across time and not countries, might be acting as a proxy for time. However, including a trend variable in the model along with the exchange rate does not alter the results. Furthermore, the trend variable when included on its own in the model is not significant. Therefore, we are confident we are picking up effects of the exchange rate. Finally, general levels of EU support are tied to more specific support for EU monetary policy in the form of the euro. A one percent increase in general EU support, increases euro support by a half of a percentage point. Given that the range on EU support is quite a bit wider than the range of inflation values the potential impact of general EU support on euro support is larger. By controlling for general support, we have provided a robust test of the effect of the exchange rate and prices on the euro. The results strongly indicate that economic factors do shape the public's support for the euro but that general feelings about the EU are also important. (Table 1 here) A Model of Euro Support While the results presented so far suggest that economic factors influence overall support it is not clear how economic perceptions structure support nor is it clear how these factors weigh against other factors that are believed to play an important role in shaping individual opinions. We expect that consideration of prices

Authors: Banducci, Susan., Karp, Jeffrey. and Loedel, Peter.
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11
Although the effective inflation range in the pooled data is limited given the
convergence criteria, inflation ranges between .8 and 5.1. Therefore, the potential
impact of prices on support is sizable. The change in the exchange rate of the euro, as
was the case in the earlier study, is also a strong predictor of support. Our previous
analysis demonstrated that a strong national currency was linked to lower levels of
support while the current analysis shows that the strength of the euro against the U.S.
dollar boosts support. We were concerned that the exchange rate, as it varies only
across time and not countries, might be acting as a proxy for time. However,
including a trend variable in the model along with the exchange rate does not alter the
results. Furthermore, the trend variable when included on its own in the model is not
significant. Therefore, we are confident we are picking up effects of the exchange
rate. Finally, general levels of EU support are tied to more specific support for EU
monetary policy in the form of the euro. A one percent increase in general EU
support, increases euro support by a half of a percentage point. Given that the range
on EU support is quite a bit wider than the range of inflation values the potential
impact of general EU support on euro support is larger. By controlling for general
support, we have provided a robust test of the effect of the exchange rate and prices
on the euro. The results strongly indicate that economic factors do shape the public's
support for the euro but that general feelings about the EU are also important.
(Table 1 here)
A Model of Euro Support
While the results presented so far suggest that economic factors influence
overall support it is not clear how economic perceptions structure support nor is it
clear how these factors weigh against other factors that are believed to play an
important role in shaping individual opinions. We expect that consideration of prices


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