Inflated Concerns: Exposure to Past Inflationary Episodes and Preferences for Price Stability

Inflated Concerns: Exposure to Past Inflationary Episodes and Preferences for Price Stability
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Volume/Issue: Volume 2024 Issue 040
Publication date: March 2024
ISBN: 9798400269547
$20.00
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Topics covered in this book

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Finance , Inflation , Economics- Macroeconomics , Economics / General , Demography , Price Stability , Inflation , Individual Preferences , Learning from Experience , volatile inflation , inflated concern , rising prices , inflation episode , inflation exposure , inflation expectation , inflation concern , Price stabilization , Aging , Emerging and frontier financial markets

Summary

Using individual-level survey data for both advanced economies and emerging markets spanning over 45 years for 42 countries, we show that cohorts who have had higher exposure to past inflationary episodes (levels, as well as to more persistent or to more volatile inflation), systematically express higher concerns over rising prices. The link between past high inflation exposure and expressed concerns over price stability is particularly strong when an individual’s exposure occurs in the latter part of her working-age (as in lifecycle theory). The impact of past exposure to high inflation on contemporaneous preferences over price stability increases when surveyed in the midst of high ongoing inflation and with macroeconomic instability (as measured by GDP growth volatility), but diminishes with the quality of institutions.