To study the role of the household balance sheet for the sensitivity of consumption to inflation beliefs, I run a randomized control trial on customers of a large German bank. Participating bank customers first answer questions on their beliefs about inflation, on how various balance-sheet positions are affected by unexpected changes in inflation, as well as on the perceived past change in their real net worth. The next stage includes the information intervention, in which I randomly divide the sample into three groups, of which two receive information treatments and one serves as a control group. The two treatments are very similar, other than that one focuses on nominal assets (savings products, bonds, etc.), while the other is on nominal debt. The treatment information comprise (i) the current rate of inflation, (ii) an explanation that this recent increase is relatively harmful for savers (in the case of the asset treatment) / beneficial for debtors (in the case of the debt treatment), and (iii) a calculation of the deterioration in the real value of a representative savings product (asset treatment) / loan (debt treatment) because of the recent surge in inflation.
Following the information provision, I test for treatment effects on consumption plans, perceived changes in subjects’ real net worth, and a hypothetical real-estate transaction. Moreover, I elicit macroeconomic expectations and subjects answer questions about their background, balance sheet, risk preferences, and financial literacy. Importantly, I will also use bank data to investigate whether the treatments feed into actual consumption and financial choices. I also use bank data to investigate how the surge in inflation since 2021 has affected bank customers’ consumption-savings decisions as a function of their net nominal positions, which I partially observe in the bank data and elicit in the survey.