The Long-Term Effects of Inflation on Inflation Expectations

Fabio Braggion, Felix von Meyerinck, Nic Schaub, Michael Weber and Michael Weber
Authors registered in the RePEc Author Service: Michael Weber

No 11679, CESifo Working Paper Series from CESifo

Abstract: We study the long-term effects of inflation surges on inflation expectations using Germany as a laboratory. Households living in areas with higher local inflation during the hyperinflation of the 1920s expect higher inflation today, even after controlling for known determinants of historical inflation and inflation expectations and despite facing similar inflation rates today. Our evidence points towards a vertical transmission of inflation experiences from parents to children and a horizontal transmission through collective memory. Differential historical inflation also modulates the updating of expectations to current inflation, the response to economic policies affecting inflation, and financial decisions. We obtain similar results for Polish households residing in formerly German areas. Overall, our findings are consistent with inflationary shocks having a long-lasting impact on attitudes towards inflation, which raises the costs of disinflationary policies by central banks.

Keywords: inflation; inflation expectations; long-term persistence; German hyperinflation (search for similar items in EconPapers)
JEL-codes: D14 E31 E71 G41 N14 (search for similar items in EconPapers)
Date: 2025
New Economics Papers: this item is included in nep-cba, nep-his and nep-mon
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Related works:
Working Paper: The Long-term Effects of Inflation on Inflation Expectations (2024)
Working Paper: The Long-term Effects of Inflation on Inflation Expectations (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_11679

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