This paper researches the impact of negative and positive nominal interest rates on money illusion for individuals’ saving and investment decisions involving risk-taking. Money illusion refers to an individual’s nominal rather than real reasoning, driving towards suboptimal decisions. Using...

In principle, money illusion could explain the inertial adjustment of prices after changes of monetary policy. Hence, money illusion could provide an explanation of monetary non-neutrality. However, this explanation has been thoroughly discredited in modern economics. As a consequence,...

We investigate the overconfidence theory and inflation illusion hypothesis of asset mispricing. Both concepts address subjective asset valuation but place the impetus on differing explanations within the standard dividend-growth model. We find that one of the theoretical outcomes of...

Declining inflation rates might have negative consequences for tax revenues. Phenomena like the inflationary bracket creep in a progressive income tax system do not work any longer. With this background the paper analyzes the extent of fiscal drag for OECD countries since 1965. Some...