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Behavioral Economics and Monetary Policy

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  • Federico Favaretto
  • Donato Masciandaro

Abstract

The aim of this paper is to review the results of the existing literature on the relationships between behavioral economics and monetary policy. The description illustrates how the behavioral insights has been so far used in explaining how non standard agent choices can shape in general the macro performances and specifically the monetary policy effects. In general the behavioral assumptions seem to be used to build up more robust and/or alternative micro foundations for explaining price and wage stickiness, as well as financial unbalances, in order to justify active monetary policies for stabilization purposes

Suggested Citation

  • Federico Favaretto & Donato Masciandaro, 2014. "Behavioral Economics and Monetary Policy," BAFFI CAREFIN Working Papers 1501, BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy.
  • Handle: RePEc:baf:cbafwp:cbafwp1501
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    References listed on IDEAS

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