Households’ Response to the Wealth Effects of Inflation

85 Pages Posted: 11 Sep 2023 Last revised: 23 Apr 2024

See all articles by Philip Schnorpfeil

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

Multiple version iconThere are 2 versions of this paper

Date Written: March 5, 2024

Abstract

We study the redistributive effects of surprise inflation combining administrative bank data with an information provision experiment. 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 debt-erosion, 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.

Keywords: Inflation Beliefs, Information Treatment, Consumption, Monetary Policy

JEL Classification: D12, D14, D83, D84, E21, E31, E52

Suggested Citation

Schnorpfeil, Philip and Weber, Michael and Hackethal, Andreas, Households’ Response to the Wealth Effects of Inflation (March 5, 2024). Chicago Booth Research Paper No. 23-17, Available at SSRN: https://ssrn.com/abstract=4566360 or http://dx.doi.org/10.2139/ssrn.4566360

Philip Schnorpfeil

Goethe University Frankfurt ( email )

Grüneburgplatz 1
Frankfurt am Main, 60323
Germany

Michael Weber (Contact Author)

University of Chicago - Finance ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

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

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
149
Abstract Views
777
Rank
315,766
PlumX Metrics