The 2002 Euro Changeover: the Effects of a New Currency on Crime

Abstract

We investigate a causal relationship between the euro changeover and the change in homicide rates in developing economies using a two-stage least squares strategy and cross-sectional data, instrumenting on imports of small arms and light weapons using the strength of the ties to the original 12 euro-currency countries. Our results are consistent as we find that countries with stronger euro-12 ties saw a change in their firearms imports because of the introduction of the euro in 2002, which in turn caused a significant change in their overall homicide rates in the subsequent years.