Economic Education and Money Illusion

An Experimental Approach

Bibliographic Data

ID10713823
AuthorsHelena Chytilová (0000-0001-9171-3118, Prague University of Economics and Business), Zdeněk Chytil (0000-0001-5091-8272, Prague University of Economics and Business)
Year2014
Volume62
Issue4
Pages500-520
Publication date2014-08-01
Open AccessYes
TypeARTICLE
VenuePolitická ekonomie (JOURNAL)
Journal identifiersISSN: 0032-3233 • E-ISSN: 2336-8225
PublisherPrague University of Economics and Business (PUBLISHER • CZ)
DOI10.18267/j.polek.966
OpenAlexW2330591561
LanguageEN
References cited36

Economic education is considered of prime importance nowadays with direct implications for effectiveness of monetary policy. We aim to verify with an application of experimental method, whether economic education acquired has weakening or even suppressive effects on recently resurrected phenomenon of money illusion. If our hypothesis will be proved, previous evidence about signifi cant indirect effects of money illusion, causing significant long-lasting deviations of the economy from equilibrium after the shock, might be significantly alleviated, weakening thereby predictions of the New Keynesian model. Our findings suggest that even well-educated individuals do not have the ability to pierce the veil of money and do not form expectations properly after a fully anticipated monetary shock. As a result we can infer that money illusion is multiplied and nominal rigidities are intensifi ed even in the economy that consists of well-educated individuals

Cognitive psychology · Economics · Illusion · Keynesian economics · Macroeconomics · Monetary economics · Monetary policy · New Keynesian economics · Phenomenon · Prime (order theory) · Rational expectations · Shock (circulatory) · Economic theories and models · Economic Theory and Policy · Monetary Policy and Economic Impact · Psychology

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Open DOIOpen Access