Does Money Illusion Matter?: Reply

Ernst Fehr · Jean‐Robert Tyran

27 citations0/0 files storedAmerican Economic Review

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Monetary Policy and Economic Impact Decision-Making and Behavioral Economics Economic theories and models

Abstract

The data in Fehr and Tyran (2001) and Petersen and Winn (2014) 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 Petersen and Winn (2014) provide a misleading interpretation of both our and their own data. (JEL C92, D83, D84, E31, E32, E52)

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References

1981The Framing of Decisions and the Psychology of Choice 2024The Quarterly Journal of Economics 2001Loss Aversion and Seller Behavior: Evidence from the Housing Market 1979Inflation, Rational Valuation and the Market 1997Money Illusion 2007Money Illusion and Housing Frenzies 2001Does Money Illusion Matter?2005Money Illusion in the Stock Market: The Modigliani-Cohn Hypothesis

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