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Behavioral Economics and Monetary Policy

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  • Federico Favaretto
  • Donato Masciandaro

Abstract

The aim of this paper is to review the results of the existing literature on the relationships between behavioral economics and monetary policy. The description illustrates how the behavioral insights has been so far used in explaining how non standard agent choices can shape in general the macro performances and specifically the monetary policy effects. In general the behavioral assumptions seem to be used to build up more robust and/or alternative micro foundations for explaining price and wage stickiness, as well as financial unbalances, in order to justify active monetary policies for stabilization purposes

Suggested Citation

  • Federico Favaretto & Donato Masciandaro, 2014. "Behavioral Economics and Monetary Policy," BAFFI CAREFIN Working Papers 1501, BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy.
    • Handle: RePEc:baf:cbafwp:cbafwp1501
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    2. Mr. Ashraf Khan, 2018. "A Behavioral Approach to Financial Supervision, Regulation, and Central Banking," IMF Working Papers 2018/178, International Monetary Fund.
    3. Anton, Roman, 2015. "Monetary Development and Transmission in the Eurosystem," MPRA Paper 67323, University Library of Munich, Germany, revised 08 Oct 2015.
    4. Lorenzo Esposito & Lorenzo Marrese, 2021. "The impact of cognitive skills on investment decisions. An empirical assessment and policy suggestions," DISCE - Quaderni del Dipartimento di Politica Economica dipe0019, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).

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