The Long-term Effects of Inflation on Inflation Expectations: Fabio Braggion, Tilburg University

Event Date: 23 October 2024

Speaker: Fabio Braggion, Tilburg University

Venue: Strathclyde Business School, Cathedral Wing, CW406B

Time: 2-3pm

Abstract:

We study the long-term effects of inflation surges on inflation expectations. German households living in areas with higher local inflation during the hyperinflation of the 1920s expect higher inflation today, after partialling out determinants of historical inflation and current inflation expectations. Our evidence points towards transmission of inflation experiences from parents to children and 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.

Published: 22 October 2024