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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. Vienna: SUERF - The European Money and Finance Forum.

Abstract

The recent surge in inflation represents the first time many individuals experience inflation considerably above central banks’ targets. Despite limited inflation experience, inflation expectations of many households have been upward biased relative to ex-post realizations and target rates. This column proposes inflation shocks in the more distant past as an explanation for elevated inflation expectations. Consistent with this conjecture, German households living in areas with higher local inflation during the hyperinflation of the 1920s expect higher inflation today. Long-lasting effects of inflation shocks on attitudes toward inflation have important implications for monetary and fiscal policy as managing inflation expectations becomes more difficult.

Abstract

The recent surge in inflation represents the first time many individuals experience inflation considerably above central banks’ targets. Despite limited inflation experience, inflation expectations of many households have been upward biased relative to ex-post realizations and target rates. This column proposes inflation shocks in the more distant past as an explanation for elevated inflation expectations. Consistent with this conjecture, German households living in areas with higher local inflation during the hyperinflation of the 1920s expect higher inflation today. Long-lasting effects of inflation shocks on attitudes toward inflation have important implications for monetary and fiscal policy as managing inflation expectations becomes more difficult.

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Additional indexing

Item Type:Scientific Publication in Electronic Form
Communities & Collections:03 Faculty of Economics > Department of Banking and Finance
Dewey Decimal Classification:330 Economics
Uncontrolled Keywords:Inflation, inflation expectations, long-term persistence, German hyperinflation
Scope:Discipline-based scholarship (basic research)
Language:English
Date:1 September 2023
Deposited On:15 Jan 2024 10:10
Last Modified:13 Mar 2024 14:54
Publisher:SUERF - The European Money and Finance Forum
Series Name:SUERF Policy Brief
OA Status:Green
Free access at:Official URL. An embargo period may apply.
Official URL:https://www.suerf.org/suerf-policy-brief/75253/the-long-term-effects-of-inflation-on-inflation-expectations
Related URLs:https://www.zora.uzh.ch/id/eprint/253085/
https://www.zora.uzh.ch/id/eprint/252730/
https://www.zora.uzh.ch/id/eprint/235041/
Other Identification Number:merlin-id:24268
  • Content: Published Version
  • Language: English