Subjective well-being approach for testing money illusion-evidence using data from Social Weather Stations

• Main Author: Beja, Edsel L, Jr
• Format: text
• Published: Archīum Ateneo 2017
• Subjects: Economics
• Online Access: https://archium.ateneo.edu/economics-faculty-pubs/13; https://ideas.repec.org/a/phs/prejrn/v54y2017i1p47-62.html
• Institution: Ateneo De Manila University

This paper tests money illusion using measures of subjective well-being, nominal income, and price. It tests the hypothesis that there is no money illusion in the sense that proportional changes in both nominal income and price do not bring about a change in subjective well-being. The study uses food poverty data from Social Weather Stations as a proxy measure for nominal income and food Consumer Price Index inflation from the Philippine Statistics Authority as a proxy measure for price. The findings suggest no money illusion in general. More specifically, the findings provide conclusive evidence of no money illusion for the food-poor but not for the food-nonpoor.