Macro/Trade Seminar | Bank-Dependent Households and The Unequal Costs of Inflation by Fernando Cirelli – School of Economics Macro/Trade Seminar | Bank-Dependent Households and The Unequal Costs of Inflation by Fernando Cirelli – School of Economics

Macro/Trade Seminar | Bank-Dependent Households and The Unequal Costs of Inflation by Fernando Cirelli

 

School of Economics

Invites you to a

Macroeconomics and Trade seminar presented by

Fernando Cirelli

Columbia University School of International and Public Affairs (SIPA)

 

 

Bank-Dependent Households and The Unequal Costs of Inflation

 

Friday 15 March 2024

10:00am – 11.30am

 Room 441 (Level 4)

A02 Social Sciences Building
Camperdown Campus

The University of Sydney NSW 2006

 I study the welfare cost of anticipated inflation with an emphasis on distributional considerations. Two facts motivate my approach. First, around 60% of U.S. households are Bank-Dependent: they save all their liquid assets in bank deposits. Second, there is imperfect passthrough of market interest rates to bank deposit rates, i.e. deposit rates move less than one-to-one with market rates. As a result, high expected inflation lowers the real return on liquid savings for Bank-Dependent households, which impairs their precautionary saving capacity. I study a model of non-competitive banks along with households that vary in financial sophistication. In the model, the joint distribution of households’ portfolio choices and wealth shapes demand elasticities for deposits thereby influencing banks’ optimal interest rates. I use the model to explore the consequences of permanent and temporary changes in inflation. The model predicts the welfare costs of high inflation to be disproportionately borne by low- and medium-wealth households that rely on deposits to smooth consumption.

For further information contact: Macroeconomics and Trade seminar series coordinator

Dr James Graham (james.a.graham@sydney.edu.au)

For all upcoming seminars in School of Economics see Our events and Calendar

Date

Mar 15 2024
Expired!

Time

10:00 am - 11:30 pm

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