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Households' response to the wealth effects of inflation

Philip Schnorpfeil, Michael Weber and Andreas Hackethal

No 2904, Working Paper Series from European Central Bank

Abstract: We study the redistributive effects of surprise inflation combining administrative bank data with an information provision experiment during an episode of historic inflation. On average, households are well-informed about prevailing inflation and are concerned about its impact on their wealth; yet, while many households know about inflation eroding nominal assets, most are unaware of nominal-debt erosion. Once they receive information on the debt-erosion channel, households view nominal debt more positively and increase estimates of their own real net wealth. These changes causally affect actual consumption and hypothetical debt decisions. Our findings suggest that real wealth mediates the sensitivity of consumption to inflation once households are aware of the wealth effects of inflation JEL Classification: D12, D14, D83, D84, E21, E31, E52

Keywords: Consumption; Inflation Beliefs; Information Treatment; Monetary Policy (search for similar items in EconPapers)
Date: 2024-02
New Economics Papers: this item is included in nep-ban and nep-mon
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Related works:
Working Paper: Households' Response to the Wealth Effects of Inflation (2024) Downloads
Working Paper: Households’ Response to the Wealth Effects of Inflation (2023) Downloads
Working Paper: Households' response to the wealth effects of inflation (2023) Downloads
Working Paper: Households' Response to the Wealth Effects of Inflation (2023) Downloads
Working Paper: Households' response to the wealth effects of inflation (2023) Downloads
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