Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/305759 
Year of Publication: 
2024
Series/Report no.: 
IZA Discussion Papers No. 17317
Publisher: 
Institute of Labor Economics (IZA), Bonn
Abstract: 
We implement a survey-based randomized information treatment that generates independent variation in the inflation expectations and the uncertainty about future inflation of European households. This variation allows us to assess how both first and second moments of inflation expectations separately affect subsequent household decisions. We document several key findings. First, higher inflation uncertainty leads households to reduce their subsequent durable goods purchases for several months, while a higher expected level of inflation increases them. Second, an increase in uncertainty about inflation induces households to tilt their portfolios towards safe and away from riskier asset holdings. Third, higher inflation uncertainty encourages household job search, leading to higher subsequent employment among the unemployed and less under-employment among the employed. Finally, we document that the level of inflation expectations has a different effect from uncertainty in inflation expectations and thus it is crucial to take into account both to measure their separate effects on decisions.
Subjects: 
inflation uncertainty
consumption
household finance
labor supply
consumer expectations survey
JEL: 
E31
C83
D84
G51
Document Type: 
Working Paper

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