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Institutions, experiences and inflation aversion

Author

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  • Berleman, Michael

    (Helmut Schmidt University, Hamburg)

  • Enkelmann, Sören

    (Leuphana University Lüneburg)

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.

Suggested Citation

  • Berleman, Michael & Enkelmann, Sören, 2014. "Institutions, experiences and inflation aversion," Working Paper 143/2014, Helmut Schmidt University, Hamburg.
    • Handle: RePEc:ris:vhsuwp:2014_143
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    Citations

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    Cited by:

    1. Goldfayn-Frank, Olga & Wohlfart, Johannes, 2018. "How do consumers adapt to a new environment in their economic forecasting? Evidence from the German reunification," IMFS Working Paper Series 129, Goethe University Frankfurt, Institute for Monetary and Financial Stability (IMFS).
    2. Goldfayn-Frank, Olga & Wohlfart, Johannes, 2019. "How Do Consumers Adapt to a New Environment in their economic forecasting? Evidence from the German Reunification," VfS Annual Conference 2019 (Leipzig): 30 Years after the Fall of the Berlin Wall - Democracy and Market Economy 203668, Verein für Socialpolitik / German Economic Association.
    3. Goldfayn-Frank, Olga & Wohlfart, Johannes, 2020. "Expectation formation in a new environment: Evidence from the German reunification," Journal of Monetary Economics, Elsevier, vol. 115(C), pages 301-320.
    4. Lukas Haffert & Nils Redeker & Tobias Rommel, 2021. "Misremembering Weimar: Hyperinflation, the Great Depression, and German collective economic memory," Economics and Politics, Wiley Blackwell, vol. 33(3), pages 664-686, November.

    More about this item

    Keywords

    endogenous preferences; inflation aversion; natural experiment; Germany;
    All these keywords.

    JEL classification:

    • E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • P22 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Prices

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