Households' Response to the Wealth Effects of Inflation
80 Pages Posted: 22 Nov 2022 Last revised: 27 Nov 2023
Philip Schnorpfeil
Goethe University Frankfurt
Michael Weber
University of Chicago - Finance; National Bureau of Economic Research (NBER)
Andreas Hackethal
Goethe University Frankfurt - Faculty of Economics and Business Administration; Leibniz Institute for Financial Research SAFE
Date Written: November 27, 2023
Abstract
We study the redistributive effects of surprise inflation combining administrative bank data with an information provision experiment during an episode of historic inflation. On average, households are well-informed about prevailing inflation and are concerned about its impact on their wealth; yet, while many households know about inflation eroding nominal assets, most are unaware of nominal-debt erosion. Once they receive information on the debt-erosion channel, households view nominal debt more positively and increase estimates of their own real net wealth. These changes causally affect actual consumption and hypothetical debt decisions. Our findings suggest that real wealth mediates the sensitivity of consumption to inflation once households are aware of the wealth effects of inflation.
Keywords: Inflation Beliefs, Information Treatment, Consumption, Monetary Policy
JEL Classification: D12, D14, D83, D84, E21, E31, E52
Suggested Citation: Suggested Citation
Philip Schnorpfeil (Contact Author)
Goethe University Frankfurt ( email )
Grüneburgplatz 1
Frankfurt am Main, 60323
Germany
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Andreas Hackethal
Goethe University Frankfurt - Faculty of Economics and Business Administration ( email )
Theodor-W.-Adorno Platz 3
Frankfurt am Main, 60323
Germany

Leibniz Institute for Financial Research SAFE ( email )
(http://www.safe-frankfurt.de)
Theodor-W.-Adorno-Platz 3
Frankfurt am Main, 60323
Germany
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