Money illusion and the long-run Phillips curve in staggered wage-setting models
AbstractWe consider the effect of money illusion - defined referring to Stevens' ratio estimation function - on the long-run Phillips curve in an otherwise standard New Keynesian model of sticky wages. We show that if agents under-perceive real economic variables, negative money non-superneutralities will become more severe. On the contrary, if agents over-perceive real variables, positive money superneutralities will arise.
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Bibliographic InfoPaper provided by University of Verona, Department of Economics in its series Working Papers with number 14/2010.
Date of creation: Sep 2010
Date of revision:
Phillips curve; inflation; nominal inertia; monetary policy; dynamic general equilibrium; money illusion; Stevens' ratio estimation function;
Find related papers by JEL classification:
- E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
- E20 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
- E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
- E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-10-16 (All new papers)
- NEP-CBA-2010-10-16 (Central Banking)
- NEP-MAC-2010-10-16 (Macroeconomics)
- NEP-MON-2010-10-16 (Monetary Economics)
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