Does Money Illusion Matter? Reply

The data in Fehr and Tyran (FT, 2001) and Luba Petersen and Abel Winn (PW,2013) show that money illusion plays an important role in nominal price adjustment after a fully anticipated negative monetary shock. Money Illusion affects subjects' expectations, and causes pronounced nominal inertia after a negative shock but much less inertia after a positive shock. Thus PW provide a misleading interpretation both of our and their own data.

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Year of publication:	2014
Authors:	Fehr, Ernst ; Tyran, Jean-Robert
Published in:	American Economic Review. - American Economic Association - AEA. - Vol. 104.2014, 3, p. 1063-71
Publisher:	American Economic Association - AEA

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Extent:	application/pdf application/zip
Type of publication:	Article
Notes:	DOI: 10.1257/aer.104.3.1063
Classification:	C92 - Laboratory; Group Behavior ; D83 - Search, Learning, Information and Knowledge ; D84 - Expectations; Speculations ; E31 - Price Level; Inflation; Deflation ; E32 - Business Fluctuations; Cycles ; E52 - Monetary Policy (Targets, Instruments, and Effects)
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10010815742