Preliminary Proceedings of the 68th International Academic Conference, Prague

THE IMPACT OF INFLATION ON HOUSEHOLD SAVINGS AND INVESTMENT BEHAVIOR IN GERMANY (2015–2022)

JANNIK SCHUMANN

Abstract:

This paper examines how rising inflation affected household saving behavior in Germany between 2015 and 2022. Using longitudinal microdata from the Socio-Economic Panel (SOEP) and a two-way fixed-effects design, we estimate the impact of monthly year-over-year inflation on different types of saving rates—retirement-specific, wealth-building, and overall savings—while controlling for household heterogeneity and common macro shocks. The results indicate that moderate inflation fluctuations before 2020 had negligible effects on savings. During the 2021–22 inflation surge, however, saving rates declined as households used savings to buffer higher living costs. Heterogeneity is notable: younger households slightly increased retirement contributions when inflation rose, whereas older households showed no adjustment. No significant effect was found for wealth-building savings. Regional analysis reveals that the modest positive response among young households was driven by West Germans, while East German households—facing lower incomes—experienced a sharper decline in overall saving. These findings highlight that inflation primarily erodes saving capacity rather than triggering major portfolio shifts. Policy implications include strengthening financial literacy, ensuring adequate pension indexation, and targeting relief to vulnerable groups, particularly in East Germany, to prevent long-term financial insecurity.

Keywords: Inflation; Young adults; Household finance; Saving behavior; Retirement saving; Wealth accumulation; Panel data; Germany; SOEP

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