Fear of the Dark : Inflation Experiences and Subjective Well-Being

In this paper, we estimate the impact of past inflation experiences (a la Malmedier and Wachter, 2023) on people's current level of utility as revealed by their subjective well-being. Combining detailed EU-level Household Finance and Consumption Survey microdata and past experienced inflation during one's formative years, we provide a novel evidence that individual households who have experienced higher historical inflation report significantly lower current happiness scores, even after controlling for a large set of socio-economic characteristics and household wealth and income levels. However, for the old EU countries sample, individual households appear to derive higher subjective well-being from modest inflation up to around 3%