[throw0101a]

> Inflation can be psychological

One's previous life experiences also flavour perceptions of inflation. The Odd Lots podcast had an interesting episode a little while ago:

> Inflation is running hot these days. But, even when the official measures were considerably cooler, there were many people who were skeptical and insisted that inflation was running hot and rampant. It turns out, nobody really experiences inflation similarly, and one's own consumption and behavioral patterns will have a big impact on their outlook. On this episode, we speak with Berkeley professor Ulrike Malmendier, whose work has shown how one's behavior (where you shop) and history (what conditions were like earlier in your life) can inform views and perceptions of inflation for years.

* https://player.fm/series/series-1504378/why-everyones-experi...

Paper referenced:

> How do individuals form expectations about future inflation? We propose that personal experiences play an important role. Individuals adapt their forecasts to new data but overweight inflation realized during their life-times. Young individuals update their expectations more strongly in the direction of recent surprises than older individuals since recent experiences make up a larger part of their lives so far. We find support for these pre- dictions using 57 years of microdata on inflation expectations from the Reuters/Michigan Survey of Consumers. Differences in life-time experiences strongly predict differences in subjective inflation expectations. […]

* https://eml.berkeley.edu/~ulrike/Papers/InflExp_44.pdf

* https://eml.berkeley.edu/~ulrike/research.html