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Households' response to the wealth effects of inflation

  • We study the redistributive effects of inflation combining administrative bank data with an information provision experiment during an episode of historic inflation. On average, households are well-informed about prevailing inflation and are concerned about its impact on their wealth; yet, while many households know about inflation eroding nominal assets, most are unaware of nominal-debt erosion. Once they receive information on the debt-erosion channel, households update upwards their beliefs about nominal debt and their own real net wealth. These changes in beliefs causally affect actual consumption and hypothetical debt decisions. Our findings suggest that real wealth mediates the sensitivity of consumption to inflation once households are aware of the wealth effects of inflation.

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Author:Philip SchnorpfeilORCiDGND, Michael WeberGND, Andreas HackethalORCiDGND
URN:urn:nbn:de:hebis:30:3-715161
URL:https://ssrn.com/abstract=4277575
DOI:https://doi.org/10.2139/ssrn.4277575
Series (Serial Number):SAFE working paper (400)
Publisher:SAFE
Place of publication:Frankfurt am Main
Document Type:Working Paper
Language:English
Year of Completion:2023
Year of first Publication:2023
Publishing Institution:Universitätsbibliothek Johann Christian Senckenberg
Release Date:2023/09/13
Tag:Consumption; Inflation Beliefs; Information Treatment; Monetary Policy
Edition:September 5, 2023
Page Number:80
HeBIS-PPN:512115095
Institutes:Wirtschaftswissenschaften / Wirtschaftswissenschaften
Wissenschaftliche Zentren und koordinierte Programme / House of Finance (HoF)
Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS)
Wissenschaftliche Zentren und koordinierte Programme / Sustainable Architecture for Finance in Europe (SAFE)
Dewey Decimal Classification:3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft
JEL-Classification:D Microeconomics / D1 Household Behavior and Family Economics / D12 Consumer Economics: Empirical Analysis
D Microeconomics / D1 Household Behavior and Family Economics / D14 Personal Finance
D Microeconomics / D8 Information, Knowledge, and Uncertainty / D83 Search; Learning; Information and Knowledge; Communication; Belief
D Microeconomics / D8 Information, Knowledge, and Uncertainty / D84 Expectations; Speculations
E Macroeconomics and Monetary Economics / E2 Macroeconomics: Consumption, Saving, Production, Employment, and Investment / E21 Consumption; Saving; Wealth
E Macroeconomics and Monetary Economics / E3 Prices, Business Fluctuations, and Cycles / E31 Price Level; Inflation; Deflation
E Macroeconomics and Monetary Economics / E3 Prices, Business Fluctuations, and Cycles / E32 Business Fluctuations; Cycles
Sammlungen:Universitätspublikationen
Licence (German):License LogoDeutsches Urheberrecht

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