Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/314718 
Year of Publication: 
2025
Series/Report no.: 
CESifo Working Paper No. 11679
Publisher: 
CESifo GmbH, Munich
Abstract: 
We study the long-term effects of inflation surges on inflation expectations using Germany as a laboratory. Households living in areas with higher local inflation during the hyperinflation of the 1920s expect higher inflation today, even after controlling for known determinants of historical inflation and inflation expectations and despite facing similar inflation rates today. Our evidence points towards a vertical transmission of inflation experiences from parents to children and a horizontal transmission through collective memory. Differential historical inflation also modulates the updating of expectations to current inflation, the response to economic policies affecting inflation, and financial decisions. We obtain similar results for Polish households residing in formerly German areas. Overall, our findings are consistent with inflationary shocks having a long-lasting impact on attitudes towards inflation, which raises the costs of disinflationary policies by central banks.
Subjects: 
inflation
inflation expectations
long-term persistence
German hyperinflation
JEL: 
D14
E31
E71
G41
N14
Document Type: 
Working Paper
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