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The long-term effects of inflation on inflation expectations


Braggion, Fabio; Von Meyerinck, Felix; Schaub, Nic; Weber, Michael (2023). The long-term effects of inflation on inflation expectations. Chicago Booth Paper 23-13, University of Zurich.

Abstract

We study the long-term effects of inflation surges on inflation expectations. German households living in areas with higher local inflation during the hyperinflation of the 1920s expect higher inflation today. Our evidence points towards a transmission of inflation experiences from parents to children and through local institutions. Differential historical inflation also modulates the updating of expectations to current inflation, the response to unconventional fiscal policies, and financial decisions. We obtain similar results in a test with Polish households residing in formerly German areas. Overall, our findings are consistent with inflationary shocks having a long-lasting impact on attitudes towards inflation.

Abstract

We study the long-term effects of inflation surges on inflation expectations. German households living in areas with higher local inflation during the hyperinflation of the 1920s expect higher inflation today. Our evidence points towards a transmission of inflation experiences from parents to children and through local institutions. Differential historical inflation also modulates the updating of expectations to current inflation, the response to unconventional fiscal policies, and financial decisions. We obtain similar results in a test with Polish households residing in formerly German areas. Overall, our findings are consistent with inflationary shocks having a long-lasting impact on attitudes towards inflation.

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Item Type:Working Paper
Communities & Collections:03 Faculty of Economics > Department of Banking and Finance
Dewey Decimal Classification:330 Economics
Scope:Discipline-based scholarship (basic research)
Language:English
Date:6 July 2023
Deposited On:02 Aug 2023 08:43
Last Modified:13 Mar 2024 14:53
Series Name:Chicago Booth Paper
Number of Pages:50
OA Status:Green
Free access at:Publisher DOI. An embargo period may apply.
Publisher DOI:https://doi.org/10.2139/ssrn.4503275
Related URLs:https://www.zora.uzh.ch/id/eprint/252730/
https://www.zora.uzh.ch/id/eprint/253085/
https://www.zora.uzh.ch/id/eprint/253084/
Other Identification Number:merlin-id:23895
  • Content: Published Version
  • Language: English