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If experimental subjects arbitrage against market interest rates when making intertemporal allocations of cash, the … arbitrage directly by forcing all transactions with subjects to be instant electronic bank transfers, thus making arbitrage easy … and salient. We also employ four decision frames to test alternative hypotheses. Our evidence contradicts arbitrage …
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This paper offers an alternative explanation for the behavior of postwar US inflation by measuring a novel source of monetary policy time-inconsistency due to Cukierman (2002). In the presence of asymmetric preferences, the monetary authorities end up generating a systematic inflation bias...
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