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A reduction in inflation can fuel run-ups in housing prices if people suffer from money illusion. For example …
Persistent link: https://www.econbiz.de/10011071404
This paper introduces a tractable, structural model of subjective beliefs. Since agents that plan for the future care about expected future utility flows, current felicity can be increased by believing that better outcomes are more likely. On the other hand, expectations that are biased towards...
Persistent link: https://www.econbiz.de/10010746723