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

March 1, 2024

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Format: Chicago

Nicolas E Magud, and Samuel Pienknagura. Inflated Concerns: Exposure to Past Inflationary Episodes and Preferences for Price Stability, (USA: International Monetary Fund, 2024) accessed December 3, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

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.

Subject: Aging, Emerging and frontier financial markets, Financial markets, Inflation, Population and demographics, Price stabilization, Prices

Keywords: Aging, Emerging and frontier financial markets, Individual Preferences, Inflated concern, Inflation, Inflation concern, Inflation episode, Inflation expectation, Inflation exposure, Learning from Experience, Price Stability, Price stabilization, Rising prices, Volatile inflation

Publication Details

Pages:

40
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2024/040
Stock No:

WPIEA2024040
ISBN:

9798400269547
ISSN:

1018-5941

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