Past hyperinflation shapes current Austrian price outlook
A new Banque de France working paper reveals that regions more exposed to Austria's 1921-22 hyperinflation still report higher inflation expectations a century later. This historical exposure influences contemporary price outlooks, impacting policy communication.
A century of inflation memory
A Banque de France working paper documents a persistent link between historical hyperinflation exposure and current inflation expectations in Austria.
Individuals from regions more affected by the 1921-22 hyperinflation episode report higher inflation expectations today, a century later.
The study links regional inflation data from Austria's post-World War I hyperinflation with quarterly consumer surveys conducted between May 2020 and October 2024.
Researchers found that a 1 percent higher regional cumulative inflation rate in the early 1920s is associated with approximately a 0.37 percent higher expected inflation today.
This association holds true across both low-inflation (May 2020–April 2021) and high-inflation (May 2021–August 2024) subperiods, indicating a durable shaping of expectation formation.
Media's role in memory
The study further explores how local media environments contribute to the intergenerational transmission of inflation attitudes.
Regional newspapers in historically high-inflation areas tend to devote greater attention to inflation-related news, reinforcing collective memory locally.
This suggests that the legacy of past inflation can generate heterogeneous expectations across regions within a country, even after a century.
For monetary policy, this implies that a single inflationary shock can lead to varied responses in expectations regionally.
Clear and targeted communication may be particularly valuable in regions where a strong inflation history makes price increases more salient to the public.