IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

Memories of high inflation

  • Ehrmann, Michael
  • Tzamourani, Panagiota

Inflation has been well contained over the last decades in most industrialized countries. This implies, however, that memories of high inflation are likely to fade, because over time larger parts of the population have never experienced high inflation, whereas those who have might forget. This paper tests whether memories of high inflation affect agents' preferences about the importance attached to price stability, using a large database covering over 50,000 survey responses from 23 countries over the years 1981–2000. It finds that memories of hyperinflation are there to last, whereas those of less drastic inflation experiences tend to erode after around 10years. The recent decline in the importance attached to price stability does therefore most likely reflect mitigated inflation concerns in an environment of low and stable inflation, but also the consequences of fading memories of high inflation. The longer central banks have successfully delivered price stability, the more important it is for them to engage in a pro-active communication, especially with the younger generations, about the merits of low and stable inflation.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.sciencedirect.com/science/article/pii/S0176268011001479
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by Elsevier in its journal European Journal of Political Economy.

Volume (Year): 28 (2012)
Issue (Month): 2 ()
Pages: 174-191

as
in new window

Handle: RePEc:eee:poleco:v:28:y:2012:i:2:p:174-191
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505544

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Cukierman, Alex & Webb, Steven B & Neyapti, Bilin, 1992. "Measuring the Independence of Central Banks and Its Effect on Policy Outcomes," World Bank Economic Review, World Bank Group, vol. 6(3), pages 353-98, September.
  2. Alan S. Blinder & Michael Ehrmann & Marcel Fratzscher & Jakob de Haan & David-Jan Jansen, 2008. "Central Bank Communication and Monetary Policy: A Survey of Theory and Evidence," DNB Working Papers 170, Netherlands Central Bank, Research Department.
  3. N. Gregory Mankiw & Ricardo Reis, 2002. "What Measure of Inflation Should a Central Bank Target?," Harvard Institute of Economic Research Working Papers 1984, Harvard - Institute of Economic Research.
  4. Betsey Stevenson & Justin Wolfers, 2008. "Economic Growth and Subjective Well-Being: Reassessing the Easterlin Paradox," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 39(1 (Spring), pages 1-102.
  5. Di Tella, Rafael & Alesina, Alberto & MacCulloch, Robert, 2004. "Inequality and Happiness: Are Europeans and Americans Different?," Scholarly Articles 4553007, Harvard University Department of Economics.
  6. D. McFadden & J. Hausman, 1981. "Specification Tests for the Multinominal Logit Model," Working papers 292, Massachusetts Institute of Technology (MIT), Department of Economics.
  7. Luigi Guiso & Paola Sapienza & Luigi Zingales, 2006. "Does Culture Affect Economic Outcomes?," Journal of Economic Perspectives, American Economic Association, vol. 20(2), pages 23-48, Spring.
  8. Dimitris Georgarakos & Giacomo Pasini, 2011. "Trust, Sociability, and Stock Market Participation," Review of Finance, European Finance Association, vol. 15(4), pages 693-725.
  9. C�line Christensen & Peter van Els & Maarten van Rooij, 2006. "Dutch households' perceptions of economic growth and inflation," DNB Working Papers 093, Netherlands Central Bank, Research Department.
  10. Eduardo Ley, 2005. "Whose inflation? A characterization of the CPI plutocratic gap," Oxford Economic Papers, Oxford University Press, vol. 57(4), pages 634-646, October.
  11. Guido Tabellini, 2010. "Culture and Institutions: Economic Development in the Regions of Europe," Journal of the European Economic Association, MIT Press, vol. 8(4), pages 677-716, 06.
  12. Schmidt-Hebbel, Klaus & Tapia, Matias, 2002. "Inflation targeting in Chile," The North American Journal of Economics and Finance, Elsevier, vol. 13(2), pages 125-146, August.
  13. Richard Layard & Guy Mayraz & Stephen Nickell, 2007. "The Marginal Utility of Income," CEP Discussion Papers dp0784, Centre for Economic Performance, LSE.
  14. Small, Kenneth A & Hsiao, Cheng, 1985. "Multinomial Logit Specification Tests," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 26(3), pages 619-27, October.
  15. Stephen G. Cecchetti & Michael Ehrmann, 1999. "Does Inflation Targeting Increase Output Volatility? An International Comparison of Policymakers' Preferences and Outcomes," NBER Working Papers 7426, National Bureau of Economic Research, Inc.
  16. Giuliano, Paola & Spilimbergo, Antonio, 2009. "Growing Up in a Recession: Beliefs and the Macroeconomy," IZA Discussion Papers 4365, Institute for the Study of Labor (IZA).
  17. Ulrike Malmendier & Stefan Nagel, 2009. "Depression Babies: Do Macroeconomic Experiences Affect Risk-Taking?," NBER Working Papers 14813, National Bureau of Economic Research, Inc.
  18. Christian Bjørnskov & Axel Dreher & Justina A.V. Fischer, 2008. "Formal Institutions and Subjective Well-Being: Revisiting the Cross-Country Evidence," KOF Working papers 08-192, KOF Swiss Economic Institute, ETH Zurich.
  19. Rafael Di Tella & Robert J. MacCulloch & Andrew J. Oswald, 2003. "The Macroeconomics of Happiness," The Review of Economics and Statistics, MIT Press, vol. 85(4), pages 809-827, November.
  20. Wolfers, Justin, 2003. "Is Business Cycle Volatility Costly? Evidence from Surveys of Subjective Well-Being," International Finance, Wiley Blackwell, vol. 6(1), pages 1-26, Spring.
  21. Kuzin, Vladimir, 2006. "The inflation aversion of the Bundesbank: A state space approach," Journal of Economic Dynamics and Control, Elsevier, vol. 30(9-10), pages 1671-1686.
  22. Frank M. FISHER, 2005. "Price Index Aggregation: Plutocratic Weights, Democratic Weights, and Value Judgments," Annales d'Economie et de Statistique, ENSAE, issue 79-80, pages 749-757.
  23. Robert J. Shiller, 1996. "Why Do People Dislike Inflation?," Cowles Foundation Discussion Papers 1115, Cowles Foundation for Research in Economics, Yale University.
  24. Cukierman Alex, 1992. "Central Bank Strategy, Credibility, And Independance: Theory And Evidence," Journal des Economistes et des Etudes Humaines, De Gruyter, vol. 3(4), pages 10, December.
  25. Jen, Min Hua & Jones, Kelvyn & Johnston, Ron, 2009. "Global variations in health: Evaluating Wilkinson's income inequality hypothesis using the World Values Survey," Social Science & Medicine, Elsevier, vol. 68(4), pages 643-653, February.
  26. Easterly, William & Fischer, Stanley, 2001. "Inflation and the Poor," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 33(2), pages 160-78, May.
  27. Scheve, Kenneth, 2004. "Public Inflation Aversion and the Political Economy of Macroeconomic Policymaking," International Organization, Cambridge University Press, vol. 58(01), pages 1-34, February.
  28. Etienne Farvaque & Alexander Mihailov, 2008. "Intergenerational Transmission of Inflation Aversion: Theory and Evidence," Economics & Management Discussion Papers em-dp2008-71, Henley Business School, Reading University.
  29. Michael F. Bryan & Guhan Venkatu, 2001. "The demographics of inflation opinion surveys," Economic Commentary, Federal Reserve Bank of Cleveland, issue Oct.
  30. Otmar Issing, 2005. "Why did the Great Inflation not happen in Germany?," Review, Federal Reserve Bank of St. Louis, issue Mar, pages 329-336.
  31. Hayo, Bernd, 1998. "Inflation culture, central bank independence and price stability," European Journal of Political Economy, Elsevier, vol. 14(2), pages 241-263, May.
  32. van Lelyveld, Iman, 1999. "Inflation or unemployment? Who cares?," European Journal of Political Economy, Elsevier, vol. 15(3), pages 463-484, September.
  33. David G. Blanchflower, 2007. "Is Unemployment More Costly Than Inflation?," NBER Working Papers 13505, National Bureau of Economic Research, Inc.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:eee:poleco:v:28:y:2012:i:2:p:174-191. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.