This paper exploits a natural experiment in India – Inflation Targeting to study how changes in inflation expectations influence households’ consumption, savings, and investments in risky assets. Using regional heterogeneity in inflation expectations by city and city-age-gender bins due to...

Do household inflation expectations affect portfolio choice? This paper exploits inflation experience as an instrumental variable for inflation expectations and links it to household portfolios. I document that households with higher inflation expectations are more likely to invest in equity...

We introduce a new measure called Inflation-at-Risk (I@R) associated with (left and right) inflation tail risk. We estimate I@R using survey-based density forecasts. We show that it contains information not covered by usual inflation risk indicators which focus on inflation uncertainty and do...

Currently, many monetary and fiscal policy measures are aimed at preventing the financial market meltdown that started in the US subprime sector and has spread worldwide as a great recession. Although some slow recovery appears to be on the horizon, it is worthwhile exploring the fragility and...

In the last months, the world's economies were confronted with the largest economic recession since the Great Depression. The occurrence of a worldwide financial market meltdown as a consequence originally stemming from of the crisis in the US subprime housing sector was only prevented by...

Currently, many monetary and fiscal policy measures are aimed at preventing the financial market meltdown that started in the US subprime sector and has spread worldwide as a great recession. Although some slow recovery appears to be on the horizon, it is worthwhile exploring the fragility and...

In the last months, the world's economies were confronted with the largest economic recession since the Great Depression. The occurrence of a worldwide financial market meltdown as a consequence originally stemming from of the crisis in the US subprime housing sector was only prevented by...

We study how the strategic interaction of liquid-asset suppliers depends on the financial market conditions that determine asset liquidity. In our model, two asset suppliers try to profit from the liquidity services their assets confer. Asset liquidity is indirect in the sense that assets can be...

Economic assets can be classified into two broad categories: those earning an inherent return and those earning a fiat money return. This article shows that both are valued according to the same general principle based on GDP (a constant equal to expected long term real per capita GDP growth)...

This paper examines whether monetary policy affects the portfolio decisions of U.S. households. Contrary to the conventional wisdom, interest rate increases are related to higher equity ownership and higher wealth allocations to risky assets. Inflation hedging is a likely explanation for these...