How money illusions and heterogeneous beliefs affect asset prices

Wang, Hailong; Cheng, Fengchao; Hu, Duni

doi:10.1016/j.najef.2018.01.003

Cited by 3 publications

(2 citation statements)

References 35 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Low and stable inflation enables the central bank to react to the financial crisis. Nizamani et al (2017), Ma et al (2018), Roh et al (2019), Sun et al (2019), andPaul (2020) stated that asset prices predict future consumer price index movement. Moreover, Dima et al (2017) and Li et al (2017) showed that asset price development affects inflation and economic activity.…”

mentioning

confidence: 99%

Heterogeneity Effect of Central Bank Independence on Asset Prices: Evidence from Selected Developing Countries

2021

JEM

View full text Add to dashboard Cite

The study analyzes the response to financial asset prices and economic activity concerning central bank independence (CBI) shocks in selected developing countries. Financial asset prices were divided into the exchange rate, bond yield, and stock price, while the analysis was contingent on a panel Vector Autoregressive estimation. Furthermore, this study identifies heterogeneity across the countries in its sample through poolability tests. This is achieved through a mean-group estimation to the panel Vector Autoregressive by averaging the PVAR coefficients and impulse response function for all individual countries. Additionally, the sample countries are divided into two sub-groups. The results showed that central bank independence reduces bond yield and increases stock price in the first two quarters. However, it takes a year to cause an appreciation in the exchange rate. Moreover, financial asset prices have an essential role in monetary policy transmission to the extent that a change in CBI affects the exchange rate, bond yield, stock price, thereby influencing private consumption and investment.

show abstract

mentioning

confidence: 99%

Heterogeneity Effect of Central Bank Independence on Asset Prices: Evidence from Selected Developing Countries

2021

JEM

View full text Add to dashboard Cite

show abstract

“…Money illusion is related not only to redenomination, but also to many other financial phenomena. The research of Ma, Wang, Cheng, & Hu (2018) shows that money illusion, an irrational decision, can cause nominal shock risk and affect equilibrium quantities, depending on investors' beliefs in some aspects of the economy. Yamamori, Iwata, & Ogawa (2018) added that people tend not to perform optimum consumption due to nominal values and fluctuating prices.…”

Section: Introductionmentioning

confidence: 99%

Money Illusions: Post Redenomination Shopping Behavior

Prabawani

2018

Economics &Amp; Sociology

View full text Add to dashboard Cite

Money illusions potentially occur in a post-redenominating country. This is triggered by the public tendency to merely pay attention to the nominal value listed on the currency rather than the real value. Money illusion often occurs in Indonesian society and encourages hyperinflation, as one indicator of redenomination failure. Therefore, this research explores the potential of money illusion in Indonesia with Semarang, Kudus, and Banjarnegara as the research locations. These three locations represent Indonesian urban, coastal and inland areas. The data collection was conducted with a survey of 600 respondents. The data were analyzed with Cramer's V-test in order to know the potential difference of money illusion among people with different geographic, demographic, and psychographic characteristics. The results show there is a potential for money illusion in terms of educational expenses by educational level; social spending by region; electricity expenses by occupation; water expenses by occupation; entertainment spending by age and sex; and medical expenses by occupation. Hence, the government should provide additional programs to increase the people's understanding of the redenomination agenda and provide strong policies to maintain economic stability.

show abstract

Term structure dynamics in a monetary economy with learning

Ono

2019

The North American Journal of Economics and Finance

View full text Add to dashboard Cite

How money illusions and heterogeneous beliefs affect asset prices

Cited by 3 publications

References 35 publications

Heterogeneity Effect of Central Bank Independence on Asset Prices: Evidence from Selected Developing Countries

Heterogeneity Effect of Central Bank Independence on Asset Prices: Evidence from Selected Developing Countries

Money Illusions: Post Redenomination Shopping Behavior

Term structure dynamics in a monetary economy with learning

Contact Info

Product

Resources

About