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The Heterogeneous Impact of Inflation on Households' Balance Sheets

Author

Listed:
  • Mayorga Clodomiro Ferreira
  • Miguel Cardoso
  • José Miguel Leiva
  • Alvaro Ortiz

Abstract

We identify and study three key channels that shape how inflation affects wealth inequality: (i) the traditional Fisher channel through which inflation redistributes from lenders to borrowers; (ii) a nominal labour income channel through which inflation reduces the real value of sticky wages and benefits; and (iii) a relative consumption channel through which heterogeneous increases in the price of different goods affect people differently depending on their consumption baskets. We then quantify these channels for Spain in 2021 using both public surveys and a novel proprietary bank dataset that includes detailed information on clients’ assets and liabilities, credit and debit card payments, bills and labour related income. Results show that the Fisher and labour income channels are one order of magnitude larger than relative consumption. Middle-aged individuals were roughly unaffected by inflation while older ones suffered the most its consequences.

Suggested Citation

  • Mayorga Clodomiro Ferreira & Miguel Cardoso & José Miguel Leiva & Alvaro Ortiz, 2022. "The Heterogeneous Impact of Inflation on Households' Balance Sheets," Asociación Argentina de Economía Política: Working Papers 4563, Asociación Argentina de Economía Política.
    • Handle: RePEc:aep:anales:4563
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    Cited by:

    1. Aliocha Accardo & Sylvérie Herbert & Cristina Jude & Adrian Penalver, 2023. "Measuring and Comparing Consumption Inequality between France and the United States," Working papers 904, Banque de France.
    2. Rodolfo G. Campos & Jesús Fernández-Villaverde & Galo Nuño & Peter Paz, 2024. "Navigating by Falling Stars: Monetary Policy with Fiscally Driven Natural Rates," NBER Working Papers 32219, National Bureau of Economic Research, Inc.
    3. Pallotti, Filippo & Paz-Pardo, Gonzalo & Slacalek, Jiri & Tristani, Oreste & Violante, Giovanni L., 2023. "Who bears the costs of inflation? Euro area households and the 2021–2022 shock," Working Paper Series 2877, European Central Bank.
    4. Oriol Sabaté & Sara Torregrosa-Hetland, 2024. "War inflation and taxation," UB School of Economics Working Papers 2024/463, University of Barcelona School of Economics.
    5. Luigi Infante & David Loschiavo & Andrea Neri & Matteo Spuri & Francesco Vercelli, 2025. "The Heterogeneous Impact of Inflation Across the Joint Distribution of Household Income and Wealth," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 11(2), pages 703-724, July.
    6. Filippo Pallotti & Gonzalo Paz-Pardo & Jiri Slacalek & Oreste Tristani & Giovanni L. Violante, 2024. "Who Bears the Costs of Inflation? Euro Area Households and the 2021–2023 Shock," NBER Chapters, in: Inflation in the COVID Era and Beyond, National Bureau of Economic Research, Inc.
    7. Ampudia, Miguel & Ehrmann, Michael & Strasser, Georg, 2024. "Shopping behavior and the effect of monetary policy on inflation heterogeneity along the income distribution," Journal of Monetary Economics, Elsevier, vol. 148(C).
    8. Domenech Palacios, Mar, 2025. "Inflation risk and heterogeneous trading down," Working Paper Series 3156, European Central Bank.
    9. Szwacka-Mokrzycka Joanna & Marzena Lemanowicz, 2023. "The Influence of Inflation on the Economic Situation of Households in Poland," European Research Studies Journal, European Research Studies Journal, vol. 0(3), pages 119-132.
    10. Gnocato, Nicolò, 2025. "Energy price shocks, unemployment, and monetary policy," Journal of Monetary Economics, Elsevier, vol. 151(C).
    11. Joao Guerreiro & Jonathon Hazell & Chen Lian & Christina Patterson, 2024. "Why Do Workers Dislike Inflation? Wage Erosion and Conflict Costs," Discussion Papers 2440, Centre for Macroeconomics (CFM).
    12. Tao Chen & Peter Levell & Martin O'Connell, 2025. "Measuring cost of living inequality during an inflation surge," IFS Working Papers W25/21, Institute for Fiscal Studies.
    13. Ampudia, Miguel & Ehrmann, Michael & Strasser, Georg, 2023. "The effect of monetary policy on inflation heterogeneity along the income distribution," CEPR Discussion Papers 18460, C.E.P.R. Discussion Papers.
    14. Christoph Lauper & Giacomo Mangiante, 2021. "Monetary policy shocks and inflation inequality," Cahiers de Recherches Economiques du Département d'économie 21.02a, Université de Lausanne, Faculté des HEC, Département d’économie.
    15. Osbat, Chiara & Conflitti, Cristina & Eiglsperger, Martin & Goldhammer, Bernhard & Kuik, Friderike & Menz, Jan-Oliver & Rumler, Fabio & Moreno, Marta Saez & Segers, Lina & Wieland, Elisabeth & Bellocc, 2023. "Measuring inflation with heterogeneous preferences, taste shifts and product innovation: methodological challenges and evidence from microdata," Occasional Paper Series 323, European Central Bank.
    16. Coccia, Samantha & Russo, Alberto, 2025. "Inflation, inequality and financial vulnerability: Monetary vs. fiscal policy in the face of an energy shock," Energy Economics, Elsevier, vol. 143(C).
    17. Binetti, Alberto & Nuzzi, Francesco & Stantcheva, Stefanie, 2024. "People’s understanding of inflation," Journal of Monetary Economics, Elsevier, vol. 148(S).
    18. Schnorpfeil, Philip & Weber, Michael & Hackethal, Andreas, 2023. "Households' response to the wealth effects of inflation," SAFE Working Paper Series 400, Leibniz Institute for Financial Research SAFE.

    More about this item

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution

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