Understanding the Impact of Severe Hyperinflation Experience on Current Household Investment Behavior
Journal of Behavioral and Experimental Finance, Vol. 17, No. 1, pp. 60-67, 2018.
25 Pages Posted: 20 Jun 2013 Last revised: 13 Dec 2020
Date Written: April 1, 2014
Abstract
We propose that a hyperinflation event has a long-lasting effect on household investment behavior. We want to investigate whether future stock market participation can be influenced by a single extreme macroeconomic instability episode. We use data from the Brazilian Institute of Geography and Statistics and find that households who experienced hyperinflation as young adults (i) show lower willingness to invest in stocks than others, and (ii) are less likely to save for the future. Results hold after controlling for various household characteristics and other macroeconomic events.
Keywords: Hyperinflation, Investments, Household Behavior
JEL Classification: D03, D14, D83, D84, E21, G11
Suggested Citation: Suggested Citation