Inflated Concerns: Exposure to Past Inflationary Episodes and Preferences for Price Stability
IMF Working Papers, March 1, 2024
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- Inflated Concerns: Exposure to Past Inflationary Episodes and Preferences for Price Stability
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Bibliographic details
- Authors: Nicolas E Magud, Samuel Pienknagura
- Published: March 1, 2024
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9798400269547.001
Data and scope
- Individual-level survey data for both advanced economies and emerging markets.
- Coverage spans over 45 years for 42 countries.
- Publication Details:
- Pages: 40
- Volume: 2024
- Issue: 040
- Series: Working Paper No. 2024/040
- DOI: https://doi.org/10.5089/9798400269547.001
- Stock No: WPIEA2024040
- ISBN: 9798400269547
- ISSN: 1018-5941
- Publication date: March 1, 2024
- Authors: Nicolas E Magud, Samuel Pienknagura
Main empirical findings
- Cohorts with higher exposure to past inflationary episodes systematically express higher concerns over rising prices.
- Exposure dimensions linked to higher concern include:
- Levels of past inflation.
- More persistent inflation.
- More volatile inflation.
- The association between past high inflation exposure and expressed concerns is particularly strong when exposure occurs in the latter part of an individual’s working-age (consistent with lifecycle theory).
- The impact of past exposure on contemporaneous preferences for price stability is amplified when:
- Surveyed in the midst of high ongoing inflation.
- Macroeconomic instability is higher (measured by GDP growth volatility).
- The impact of past exposure on preferences for price stability diminishes with the quality of institutions.
Analytical insights
- Life-cycle timing matters: later-life exposure to inflation has a stronger effect on expressed price-stability concerns.
- Interaction effects:
- Current macroeconomic context (ongoing inflation and GDP growth volatility) strengthens the influence of past experience on preferences.
- Institutional quality moderates and reduces the persistence of inflation-driven concerns.
Policy implications and recommendations
- Communication and policy credibility strategies should account for heterogeneous preferences shaped by cohorts’ historical inflation exposure, especially for cohorts exposed late in working life.
- During episodes of high ongoing inflation or elevated GDP growth volatility, policymakers can expect heightened public concern about price stability, amplified among cohorts with past exposure.
- Strengthening institutional quality can attenuate the long-term influence of past inflationary episodes on public preferences for price stability.
IMF Working Paper: "Inflated Concerns: Exposure to Past Inflationary Episodes and Preferences for Price Stability", Nicolas E Magud and Samuel Pienknagura, March 1, 2024 (Working Paper No. 2024/040), DOI: https://doi.org/10.5089/9798400269547.001
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- Working Paper