Money illusion and the long-run Phillips curve in staggered wage-setting models

Andrea Vaona

No 14/2010, Working Papers from University of Verona, Department of Economics

Abstract: We 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.

Keywords: Phillips curve; inflation; nominal inertia; monetary policy; dynamic general equilibrium; money illusion; Stevens' ratio estimation function (search for similar items in EconPapers)
JEL-codes: E20 E3 E40 E50 (search for similar items in EconPapers)
Pages: 18
Date: 2010-09
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
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Related works:
Journal Article: Money illusion and the long-run Phillips curve in staggered wage-setting models (2013)
Working Paper: Money illusion and the long-run Phillips curve in staggered wage setting models (2011)
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