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Institutions, experiences and inflation aversion

Michael Berleman () and Sören Enkelmann ()
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Michael Berleman: Helmut Schmidt University, Hamburg, Postal: Holstenhofweg 85, 22043 Hamburg, Germany

No 143/2014, Working Paper from Helmut Schmidt University, Hamburg

Abstract: Are preferences exogenously given? Or do individual tastes and values evolve endogenously within a particular socio-economic environment? In this paper, we make use of a natural experiment to analyse the role of inflation experiences and institutions in the formation of individual inflation preferences. In particular, we exploit the division of post-war Germany to investigate to what extent the factual non-experience of inflation and 40 years of Communism have affected inflation preferences in East and West Germany. We find that historical experiences have a significant and long-lasting effect on people's preferences. Due to their specific political and economic background, East Germans are significantly more inflation averse than West Germans, even 20 years after reunification.

Keywords: endogenous preferences; inflation aversion; natural experiment; Germany (search for similar items in EconPapers)
JEL-codes: E02 E31 P22 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2014-05-15
New Economics Papers: this item is included in nep-his, nep-mac, nep-mon and nep-upt
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