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Intergenerational Transmission of Inflation Aversion: Theory and Evidence

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  • Etienne Farvaque

    () (Equippe - Universités de Lille, and DULBEA - Université Libre de Bruxelles.)

  • Alexander Mihailov

    () (School of Economics, University of Reading)

Abstract

We study the evolution of inflation aversion preferences across generations. In the theoretical part of the paper, we analyze the dynamics of such preferences in an overlapping-generations model with heterogenous mature agents characterized by different degrees of inflation aversion. We show how the stability of a society’s degree of inflation aversion depends on the strength and speed of changes in the structure of the population. The empirical part then proposes two applications in support of the theoretical results. We first link demographic structures to inflation aversion, and then proceed by looking at the relations between income (in)equality and measures of inflation aversion.

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Bibliographic Info

Paper provided by Henley Business School, Reading University in its series Economics & Management Discussion Papers with number em-dp2008-71.

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Length: 33 pages
Date of creation: 23 Nov 2008
Date of revision:
Handle: RePEc:rdg:emxxdp:em-dp2008-71

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Keywords: Intergenerational transmission; evolving preferences; inflation aversion; central bank independence; demographic change; income inequality;

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References

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  1. Stefan Krause & Fabio Mendez, 2003. "Policy Makers' Preferences, Party Ideology and the Political Business Cycle," Emory Economics 0319, Department of Economics, Emory University (Atlanta).
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  15. Krause, Stefan & Méndez, Fabio, 2008. "Institutions, arrangements and preferences for inflation stability: Evidence and lessons from a panel data analysis," Journal of Macroeconomics, Elsevier, vol. 30(1), pages 282-307, March.
  16. George A. Akerlof & William R. Dickens & George L. Perry, 1996. "The Macroeconomics of Low Inflation," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 27(1), pages 1-76.
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  18. James Bullard & Christopher J. Waller, 2002. "Central bank design in general equilibrium," Working Papers 1998-002, Federal Reserve Bank of St. Louis.
  19. de Jong, Eelke, 2002. "Why are price stability and statutory independence of central banks negatively correlated? The role of culture," European Journal of Political Economy, Elsevier, vol. 18(4), pages 675-694, November.
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Cited by:
  1. Verme, Paolo, 2009. "Happiness, Deprivation and the Alter Ego," IRISS Working Paper Series 2009-18, IRISS at CEPS/INSTEAD.

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