Inflation Expectations and Choices of Households

Category: Marketing Seminar
When: 26 June 2018
, 12:15
 - 13:30
Where: Campus Westend, RuW 4.202
Speaker: Jun. Prof. Nathanael Vellekoop, Ph.D. (Goethe University)

Nathanael Vellekoop and Mirko Wiederholt

How do households form inflation expectations? Do their inflation expectations affect their choices? To address the first question, we study longitudinal data on household inflation expectations for the period 1993-2016. We find that households have fairly stable inflation expectations at individual-specific levels. Turning to the second question, we link the survey data on inflation expectations to administrative data on assets and liabilities at the household level. We obtain several novel findings. Households with higher inflation expectations have lower net worth (assets minus liabilities). They have both less assets and less liabilities. Moreover, they hold less of all non-liquid assets (savings account, bonds, stocks, mutual funds, and housing).


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