ESSAYS IN MONETARY ECONOMICS AND HOUSEHOLD FINANCE

Abstract

This thesis consists of three independent chapters, studying topics in monetary economics and household finance. The first chapter combines several administrative data and a survey experiment to evaluate the role of households’ lifestyle changes in influencing inflation expectations. My findings highlight the relationship between personal experience, product variety and inflation expectations. The second chapter tests one specific monetary transmission mechanism through households: portfolio rebalancing. I find that savers rebalance their portfolio and “reach for yield” when interest rate falls, shifting from safe assets (bank deposits) to more risky assets (mutual funds and equities). The third chapter exploits a natural experiment in India – Inflation Targeting to study how changes in inflation expectations influence households’ consumption, savings deposits and investments in risky assets. I show that households shift their assets away from risky assets to safe assets when there is a fall in inflation expectations.