Wards Finance Seminar Series. Households' Response to the Wealth Effects of Inflation
Published: 6 March 2024
22 May. Professor Michael Weber, Chicago Booth
Professor Michael Weber, Chicago Booth
Households' Response to the Wealth Effects of Inflation
Wednesday, 22 May. 3 p.m.
Room 282 ASBS PGT
Abstract
We study the redistributive effects of surprise inflation combining administrative bank data with an information provision experiment during an episode of historic inflation. On average, households are well-informed about prevailing inflation and are concerned about its impact on their wealth; yet, while many households know about inflation eroding nominal assets, most are unaware of nominal-debt erosion. Once they receive information on the debt-erosion channel, households view nominal debt more positively and increase estimates of their own real net wealth. These changes causally affect actual consumption and hypothetical debt decisions. Our findings suggest that real wealth mediates the sensitivity of consumption to inflation once households are aware of the wealth effects of inflation.
Bio
Michael Weber joined Chicago Booth in 2014 as an Assistant Professor of Finance and was promoted to Associate Professor in 2018. He is also a faculty research fellow at the National Bureau of Economic Research in the Monetary Economics and Asset Pricing groups, Research Affiliate in the Monetary Economics and Fluctuations programme of CEPR, a member of the Macro Finance Society, a Research Professor at Ifo Institute and a research affiliate at the CESifo Research Network. He is also academic consultant for the European Central Bank, the German Bundesbank, the Federal Reserve Bank of Cleveland, and several other central banks.
His research interests include asset pricing, macroeconomics, international finance, and household finance. His work on downside risk in currency markets and other asset classes earned the 2013 AQR Insight Award. He has published in leading economics and finance journals such as the American Economic Review, the Review of Economic Studies, the Journal of Political Economy, the Review of Financial Studies and the Journal of Financial Economics.
Weber is a visiting researcher at the Bureau of Labor Statistics where he studies how the inability of firms to adjust output prices to macroeconomics shocks affects their systematic risk.
For further information, please contact business-school-research@glasgow.ac.uk
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First published: 6 March 2024