Summary

The high inflation and changing consumption patterns of recent years have been particularly difficult to capture with...

Behavioural economics – a useful complement to monetary policy analysis

Some key features of behavioural economics research

How we view risk and uncertainty – prospect theory Rules-of-thumb, mental accounting and lack of self-control Perception of fairness Social psychology factors in decision-making How life experiences influence economic decisions

A simple monetary policy framework

The interest rate, the real economy and inflation <em>Money illusion may cause households to ignore inflation</em> The monetary policy decision-making process

Behavioural economics perspectives on the rise in inflation in 2021-2022

The importance of inflation for economic decisions Mental accounting may have influenced household savings Falling prices and low turnover in the housing market Monetary policy, firms’ pricing behaviour and households’ reaction to the rise in inflation Looking ahead - lasting effects of the inflation shock

Concluding thoughts

References