Understanding the Impact of Severe Hyperinflation Experience on Current Household Investment Behavior

Abstract

In this paper we study to what extent extreme macroeconomic instability has a long-lasting effect in household investing behavior. Using data from the Brazilian National Household Survey (PNAD) and an additional survey based on the one used by Hong et al. (2004), we find evidence that individuals who were in their early adulthood during Brazil’s hyperinflation period are less willing to have financial saving than those who experienced this macroeconomic shock in other periods of their lives. Also, individuals that have memories of the hyperinflation event are 32% less likely to participate in the stock market.