Discussion paper

DP18696 The Heterogeneous Impact of Inflation on Households’ Balance Sheet

We study the different channels through which inflation affects wealth inequality. We identify three key channels: (i) the traditional Fisher channel through which inflation redistributes from lenders to borrowers; (ii) a nominal labour income channel through which inflation reduces the real value of sticky wages and benefits; and (iii) a relative consumption channel through which heterogeneous increases in the price of different goods affect people differently depending on their consumption baskets. We then quantify these channels for Spain in 2021 using both public surveys and a novel proprietary bank dataset that includes detailed information on clients’ assets and liabilities, credit and debit card payments, and bills. Results show that the Fisher and labour income channels are one order of magnitude larger than relative consumption. Middle-aged individuals were roughly unaffected by inflation while older ones suffered the most its consequences.


Ferreira, C, G Nuño, J Leiva Murillo, A Ortiz, T Rodrigo and S Vazquez (2023), ‘DP18696 The Heterogeneous Impact of Inflation on Households’ Balance Sheet‘, CEPR Discussion Paper No. 18696. CEPR Press, Paris & London. https://cepr.org/publications/dp18696