Inflation Expectations and Choices of Households

44 Pages Posted: 7 May 2019

See all articles by Nathanael Vellekoop

Nathanael Vellekoop

University of Toronto; Goethe University Frankfurt - Research Center SAFE; Netspar

Mirko Wiederholt

Sciences Po

Date Written: April 2019

Abstract

Do household inflation expectations affect consumption-savings decisions? We link survey data on quantitative inflation expectations to administrative data on income and wealth. We document that households with higher inflation expectations save less. Estimating panel data models with year and household fixed effects, we find that a one percentage point increase in a household's inflation expectation over time is associated with a 250-400 euro reduction in the household's change in net worth per year on average. We also document that households with higher inflation expectations are more likely to acquire a car and acquire higher-value cars. In addition, we provide a quantitative model of household-level inflation expectations.

Suggested Citation

Vellekoop, Nathanael and Wiederholt, Mirko, Inflation Expectations and Choices of Households (April 2019). SAFE Working Paper No. 250 (2019). Available at SSRN: https://ssrn.com/abstract=3383452 or http://dx.doi.org/10.2139/ssrn.3383452

Nathanael Vellekoop (Contact Author)

University of Toronto ( email )

Max Gluskin House
150 St George st
Toronto, Ontario M5S 3G7
Canada

HOME PAGE: http://www.nvellekoop.nl

Goethe University Frankfurt - Research Center SAFE ( email )

(http://www.safe-frankfurt.de)
Theodor-W.-Adorno-Platz 3
Frankfurt am Main, 60323
Germany

Netspar ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

HOME PAGE: http://www.nvellekoop.nl

Mirko Wiederholt

Sciences Po ( email )

27 rue Saint-Guillaume
Paris Cedex 07, 75337
France

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