Title : Heterogeneous Inflation Rates by Personal Demographics and Real Consumption Elasticity

Author : Jane Yoo, Chanho Min(Ajou University), Hosung Jung(Dongduk Womens University)

Heterogeneous optimal consumption rates are often found across households of various demographic and economic characteristics. Such characteristics are closely related to many factors of consumption from growing rates of expected income to realized inflation rates upon different consumption baskets. In this paper, we estimate heterogeneous inflation rates from South Korean credit card use data including users’ income, debt, postal code, and age from 2016 to 2022 and analyze roles of inflation rates in real consumption. From the statistics of the heterogeneous inflation rate, we find a few stylized facts including that high-income consumers have experienced lower inflation rates than other income groups. Our empirical results show that increasing inflation rates make negative impacts on both nominal and real consumption. Increases in borrowing rates of both mortgage and credit accounts lower real consumption, too. The largest drop was found from regression with a group of middle-income consumers with yearly income between 60 to 100 million won. By the first attempt to estimating heterogeneous inflation and borrowing rates and their impacts on the real consumption, this paper would contribute to advancing the analysis on the elasticity of household consumption upon changing inflation and interest rates.