ABSTRACT
This chapter focuses on the knowledge of the pioneering studies, which resurrected the money illusion concept in various ways. The growing interest in money illusion is documented by a number of studies in various areas. It discusses the potential application of money illusion in the financial markets with the long tradition of the Modigliani–Cohn hypothesis. The presence of money illusion in financial markets is also subject to investigation from the point of view of experimental economics. The presence of money illusion in the housing market might be verified by investigating the link between inflation and the price-rent ratio. The revolution in rational expectations suppressed the view that nominal wages and prices play a role in economic decisions. Fairness is acknowledged as an important element in perception of well-being. Asymmetric effects of money illusion represent very interesting findings related to strategic complementarity.
