In the last two decades a large number of game-theoretic models describing monetary policy have been used to examine the characteristics of policies over a wide range of 'rules of the game'. Regardless of the specification of the model, the degree of inflation aversion - relative to unemployment - plays an important role. In this paper I estimate inflation aversion at the individual level from survey data, and test the theoretical assumptions used for various models. The results show that income has a small role in explaining aversion to inflation and that redistributional motivation and political inclination have more significant effects.
- Monetary policy
- Output-inflation preferences