Inflation Expectations and Choices of Households | Zendy

Nathanaël Vellekoop | Zendy; Mirko Wiederholt | Zendy

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Inflation Expectations and Choices of Households

Author(s) -

Nathanaël Vellekoop,

Mirko Wiederholt

Publication year - 2019

Publication title -

ssrn electronic journal

Language(s) - English

Resource type - Journals

ISSN - 1556-5068

DOI - 10.2139/ssrn.3383452

Subject(s) - economics , inflation (cosmology) , consumption (sociology) , percentage point , point (geometry) , value (mathematics) , panel data , survey data collection , affect (linguistics) , household income , econometrics , monetary economics , demographic economics , finance , geography , psychology , social science , statistics , physics , geometry , mathematics , communication , sociology , theoretical physics , archaeology , machine learning , computer science

Do household in ation expectations affect consumption-savings decisions? We link survey data on quantitative in ation expectations to administrative data on income and wealth. We document that households with higher in ation 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 in ation 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 in ation expectations are more likely to acquire a car and acquire higher-value cars. In addition, we provide a quantitative model of household-level in ation expectations.

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