Inequality and Inflation

Bart Hobijn reviews the literature concerning how households differ in the goods and services they buy and in the composition of their investment portfolios. These two differences result in inequality in both their inflation experiences as well as in their exposure to inflation risks. How large are differences in inflation experiences across different types of households and in the extent to which households are exposed to inflation risk? The answer to this question matters for many policy decisions. For example, it affects the choice of appropriate indexation of benefits and salaries, the quantification of changes in the inequality in standards of living, as well as the assessment of the effects of monetary and fiscal policy measures.