![]() When the prices of essential goods rise, low-income households are particularly affected. Households experience inflation differently depending on their spending allocation. JEL Code D12 : Microeconomics→Household Behavior and Family Economics→Consumer Economics: Empirical Analysis D84 : Microeconomics→Information, Knowledge, and Uncertainty→Expectations, Speculations J63 : Labor and Demographic Economics→Mobility, Unemployment, Vacancies, and Immigrant Workers→Turnover, Vacancies, LayoffsĪbstract This article presents evidence on the distributional effects of the recent surge in inflation on households. These heterogeneous results have important implications for the expected impact on consumption of job protection measures such as job retention schemes. At the same time, we do not find a positive consumption response of workers who unexpectedly retain their job. This supports the notion that the persistence of the unemployment shock is an important factor of the consumption response to a job loss. The negative consumption response to an unexpected job loss is stronger for workers who have worse perceptions of the local labour market, are older or have lower levels of liquid wealth. We find that an unexpected job loss leads to a negative consumption response, while this e˙ect is muted for workers with ex-ante job loss expectations - consistent with the Permanent Income Hypothesis. JEL Code G14 : Financial Economics→General Financial Markets→Information and Market Efficiency, Event Studies, Insider Trading G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages G23 : Financial Economics→Financial Institutions and Services→Non-bank Financial Institutions, Financial Instruments, Institutional InvestorsĪbstract Probabilistic job loss expectations elicited in the Consumer Expectations Survey have predictive power for future job loss. Dealers then disseminate this information to financial markets. Our findings suggest that banks hold valuable private information which is shared in their trades with dealers. We find that banks lending to a corporation purchase CDSs on this corporation at lower prices, and that, after trading with banks, dealers can earn higher margins on these CDSs when trading with other investors. Abstract Can banks trade credit default swaps (CDSs) referenced on their current corporate clients at competitive prices, or are banks penalized for potentially holding private information? To answer this question we merge CDS trades reported under the European Market Infrastructure Regulation (EMIR) with syndicated loans from DealScan, and compare the prices on similar CDSs that the same dealer offers to banks and to other investors.
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