
Jour Fixe - Inflation, Net Nominal Positions, and Consumption
Dr. Philip Schnorpfeil
Inflation, Net Nominal Positions, and Consumption
This paper studies the redistributive effects of inflation across households with varying nominal wealth positions using a randomized information provision experiment on clients of a large bank. On average, individuals are well informed about current levels of inflation and are concerned about its impact on their wealth; yet, most individuals are not aware how inflation erodes nominal asset and debt positions. Once they receive information on this erosion channel, they update their perceptions and expectations about their own personal net nominal positions. Learning about the erosion of nominal positions by inflation has real effects and causally affects individuals' choices in hypothetical real-estate transactions and their consumption plans. The findings suggest that household wealth mediates the sensitivity of consumption to inflation once households are aware of the balance-sheet effects of inflation.
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