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Households' response to the wealth effects of inflation

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  • Schnorpfeil, Philip
  • Weber, Michael
  • Hackethal, Andreas

Abstract

We study households' response to the redistributive effects of inflation combining bank data with an information experiment during historic inflation. Households are generally well-informed about inflation and concerned about its wealth impact; yet, while knowledge about inflation eroding nominal assets is widespread, most households are unaware of nominal-debt erosion. When informed about the latter, households view nominal debt more positively and increase estimates of their real net wealth. These changes causally affect actual consumption and hypothetical debt decisions. Our findings suggest real wealth mediates the sensitivity of consumption to inflation once households are aware of the wealth effects of inflation.

Suggested Citation

  • Schnorpfeil, Philip & Weber, Michael & Hackethal, Andreas, 2024. "Households' response to the wealth effects of inflation," CFS Working Paper Series 728, Center for Financial Studies (CFS).
    • Handle: RePEc:zbw:cfswop:308805
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    Cited by:

    1. Sebastian Link & Andreas Peichl & Oliver Pfäuti & Christopher Roth & Johannes Wohlfart, 2023. "Attention to the Macroeconomy," ECONtribute Discussion Papers Series 256, University of Bonn and University of Cologne, Germany.
    2. repec:ecb:ecbdps:202424 is not listed on IDEAS
    3. Philip Schnorpfeil & Michael Weber & Andreas Hackethal & Michael Weber, 2024. "Inflation and Trading," CESifo Working Paper Series 11580, CESifo.
    4. Janet Hua Jiang & Rupal Kamdar & Kelin Lu & Daniela Puzzello, 2024. "How Do Households Respond to Expected Inflation? An Investigation of Transmission Mechanisms," CAEPR Working Papers 2024-004 Classification-D, Center for Applied Economics and Policy Research, Department of Economics, Indiana University Bloomington.
    5. Jessica Piccolo & Yuriy Gorodnichenko, 2025. "Homeownership and Attention to Inflation: Evidence from Information Treatments," NBER Working Papers 33595, National Bureau of Economic Research, Inc.

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    More about this item

    Keywords

    Inflation Beliefs; Information Treatment; Consumption; Monetary Policy;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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