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Echoes of Hyperinflation: The Link Between past Exposure and Formation of Expectations

Author

Listed:
  • Akgunduz, Yusuf Emre

    (Central Bank of the Republic of Turkiye)

  • Cilasun, Seyit Mumin

    (TED University)

  • Deryol, Ahmet

    (Central Bank of the Republic of Turkiye)

  • Tumen, Semih

    (Amazon)

Abstract

This paper studies how lifetime inflation exposure shapes individuals' inflation expectations, perceptions, and financial behavior. Using a large individual-level dataset from Türkiye spanning 2014 to 2024, combined with detailed measures of past inflation experiences, we show that individuals who have lived through higher inflation consistently report higher expected and perceived inflation. They also respond more strongly to current inflation conditions. The effects are larger for less educated and lower income individuals. In additional analysis, we find that greater lifetime inflation exposure is associated with higher use of retail loans, especially fixed rate loans. These results highlight the persistent influence of past economic conditions on expectation formation and household decisions in an emerging economy with a history of volatile inflation.

Suggested Citation

  • Akgunduz, Yusuf Emre & Cilasun, Seyit Mumin & Deryol, Ahmet & Tumen, Semih, 2026. "Echoes of Hyperinflation: The Link Between past Exposure and Formation of Expectations," IZA Discussion Papers 18543, IZA Network @ LISER.
    • Handle: RePEc:iza:izadps:dp18543
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    Keywords

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    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • E03 - Macroeconomics and Monetary Economics - - General - - - Behavioral Macroeconomics
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household

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