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).
| Original language | English |
|---|---|
| Journal | American Economic Review |
| Volume | 104 |
| Issue number | 3 |
| Pages (from-to) | 1063-1071 |
| Number of pages | 9 |
| ISSN | 0002-8282 |
| DOIs | |
| Publication status | Published - Mar 2014 |