Money Illusion and Strategic Complementarity as Causes of Monetary Non-Neutrality

  • Jean-Robert Tyran

Part of the Lecture Notes in Economics and Mathematical Systems book series (LNE, volume 472)

Table of contents

  1. Front Matter
    Pages I-X
  2. Introduction

    1. Jean-Robert Tyran
      Pages 1-4
  3. Approaches to the Problem of Monetary Non-Neutrality

    1. Front Matter
      Pages 5-8
    2. Jean-Robert Tyran
      Pages 22-35
    3. Jean-Robert Tyran
      Pages 46-50
  4. Experimental Study

    1. Front Matter
      Pages 51-51
    2. Jean-Robert Tyran
      Pages 53-59
  5. Results of Experimental Study

    1. Front Matter
      Pages 79-79
    2. Jean-Robert Tyran
      Pages 81-95
    3. Jean-Robert Tyran
      Pages 96-118
    4. Jean-Robert Tyran
      Pages 140-143
  6. Discussion of Results

    1. Front Matter
      Pages 145-145
    2. Jean-Robert Tyran
      Pages 147-158
    3. Jean-Robert Tyran
      Pages 159-168
  7. Back Matter
    Pages 169-230

About this book


In principle, money illusion could explain the inertial adjustment of prices after changes of monetary policy. Hence, money illusion could provide an explanation of monetary non-neutrality. However, this explanation has been thoroughly discredited in modern economics. As a consequence, economists have ever since the 1970s searched for alternative explanations for nominal rigidity. These explanations are all based on the assumption of fully rational economic agents, holding rational expectations. This book argues that money illusion has been prematurely dismissed as an explanation of monetary non-neutrality. Methods of experimental economics are used to investigate the real aggregate effects of money illusion. It is shown that money illusion in fact causes (short-run) real income effects if strategic complementarity prevails. Strategic complementarity is an important characteristic of naturally occurring macroeconomies and is a recurrent theme in most models explaining nominal rigidity.


Geldillusion Geldtheorie Monetary Illusion Monetary Non-Neutrality Neutralität des Geldes Nicht-Neutralität des Geldes Nominal Rigidity Nominale Rigiditäten Strategic Complementarity monetary economics monetary policy

Authors and affiliations

  • Jean-Robert Tyran
    • 1
  1. 1.Department of EconomicsUniversity of St. GallenSt. GallenSwitzerland

Bibliographic information

  • DOI
  • Copyright Information Springer-Verlag Berlin Heidelberg 1999
  • Publisher Name Springer, Berlin, Heidelberg
  • eBook Packages Springer Book Archive
  • Print ISBN 978-3-540-65871-9
  • Online ISBN 978-3-642-46883-4
  • Series Print ISSN 0075-8442
  • Buy this book on publisher's site