The Causal Effects of Inflation Uncertainty on Households' Beliefs and Actions

Dimitris Georgarakos, Yuriy Gorodnichenko, Olivier Coibion and Geoff Kenny

No 19563, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We implement a survey-based randomized information treatment that generates independent variation in the inflation expectations and the uncertainty about future inflation of European households. This variation allows us to assess how both first and second moments of inflation expectations separately affect subsequent household decisions. We document several key findings. First, higher inflation uncertainty leads households to reduce their subsequent durable goods purchases for several months, while a higher expected level of inflation increases them. Second, an increase in uncertainty about inflation induces households to tilt their portfolios towards safe and away from riskier asset holdings. Third, higher inflation uncertainty encourages household job search, leading to higher subsequent employment among the unemployed and less under-employment among the employed. Finally, we document that the level of inflation expectations has a different effect from uncertainty in inflation expectations and thus it is crucial to take into account both to measure their separate effects on decisions.

JEL-codes: C83 D84 (search for similar items in EconPapers)
Date: 2024-10
References: Add references at CitEc
Citations:

Downloads: (external link)
https://cepr.org/publications/DP19563 (application/pdf)

Related works:
Working Paper: The Causal Effects of Inflation Uncertainty on Households' Beliefs and Actions (2025)
Working Paper: The Causal Effects of Inflation Uncertainty on Households' Beliefs and Actions (2024)
Working Paper: The Causal Effects of Inflation Uncertainty on Households' Beliefs and Actions (2024)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:19563

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP19563

Access Statistics for this paper

More papers in CEPR Discussion Papers from Centre for Economic Policy Research 33 Great Sutton Street, London EC1V 0DX, UK.
Bibliographic data for series maintained by CEPR ().