Does Money Illusion Matter?

@article{Fehr1998DoesMI,
  title={Does Money Illusion Matter?},
  author={Ernst Fehr and Jean-Robert Tyran},
  journal={Monetary Economics},
  year={1998}
}
This paper shows that a small amount of individual-level money illusion may cause considerable aggregate nominal inertia after a negative nominal shock. In addition, our results indicate that negative and positive nominal shocks have asymmetric effects because of money illusion. While nominal inertia is quite substantial and long lasting after a negative shock, it is rather small after a positive shock. 
Does Money Illusion Matter? Comment
This paper experimentally investigates whether money illusion generates substantial nominal inertia. Building on the design of Fehr and Tyran (2001), we find no evidence that agents choose highExpand
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 negativeExpand
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Our experiments refine and extend the work of Fehr and Tyran (2001), who suggest that money illusion can contribute significantly to nominal inertia in strategically complementary environments. ByExpand
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The paper discusses the implication of money illusion on persistent unemployment. A particular form of money illusion is assumed and this is modeled into the efficiency wage theory while separatingExpand
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Money illusion means that people behave differently when the same objective situation is represented in nominal terms rather than in real terms. This paper shows that seemingly innocuous differencesExpand
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Money illusion means that people behave differently when the same objective situation is represented in nominal terms rather than in real terms. This paper shows that seemingly innocuous differencesExpand
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