Memories of high inflation

Michael Ehrmann and Panagiota Tzamourani

European Journal of Political Economy, 2012, vol. 28, issue 2, 174-191

Abstract: Inflation has been well contained over the last decades in most industrialized countries. This implies, however, that memories of high inflation are likely to fade, because over time larger parts of the population have never experienced high inflation, whereas those who have might forget. This paper tests whether memories of high inflation affect agents' preferences about the importance attached to price stability, using a large database covering over 50,000 survey responses from 23 countries over the years 1981–2000. It finds that memories of hyperinflation are there to last, whereas those of less drastic inflation experiences tend to erode after around 10years. The recent decline in the importance attached to price stability does therefore most likely reflect mitigated inflation concerns in an environment of low and stable inflation, but also the consequences of fading memories of high inflation. The longer central banks have successfully delivered price stability, the more important it is for them to engage in a pro-active communication, especially with the younger generations, about the merits of low and stable inflation.

Keywords: Inflation aversion; Inflation memories; Hyperinflation; World Values Survey (search for similar items in EconPapers)
JEL-codes: D10 E31 E52 (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (52)

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Working Paper: Memories of high inflation (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:poleco:v:28:y:2012:i:2:p:174-191

DOI: 10.1016/j.ejpoleco.2011.11.005

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