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.
Authors
Fabio Braggion, Felix von Meyerinck, Nic Schaub, Michael Weber
- Acknowledgements & Disclosure
- Financial support from the Swiss National Science Foundation (grant number 207668) and the sponsors association of the Swiss Institute of Banking and Finance of the University of St. Gallen is gratefully acknowledged. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
- DOI
- https://doi.org/10.3386/w32160
- Published in
- United States of America
