Paula Patzelt

Working papers

Estimating the rise in expected inflation from higher energy prices (with Ricardo Reis)

Submitted. First draft: February 2024. CEPR discussion paper. Presentation video.

When the price of electricity increases by 1%, households’ expected inflation increases by 1.2 to 1.5 basis points. But, if those expectations have become unanchored, then the effect is higher by 0.2 to 1.5 bps. Further, the causal impact of a supply shock to electricity prices is gradual, peaking only 8 to 12 months after impact. This paper arrives at these estimates by exploiting cross-sectional variation from newly-available panel data on expected inflation by Euro area households across region, gender, education, and income, and on the cost of energy across region and source, and by proposing new measures of supply shocks. The estimates imply that households under-react to electricity price changes, that the rise in electricity prices in 2021-23 accounted for a small share of the rise in expected inflation, and that anchoring expectations is important in the face of supply shocks.

Media: Financial Times, Twitter thread

Renewable energy supply shocks from wind electricity

Working paper. First draft: August 2024.

This paper identifies electricity supply shocks by exploiting the fact that variations in wind speed at turbine locations are exogenous with respect to macroeconomic outcomes and drive electricity prices in European wholesale markets inframarginally. Instrumenting electricity price changes with these wind supply shocks, I find that higher electricity prices raise inflation and reduce electricity use as expected, but generate surprising effects on economic activity. Unemployment rises, but industrial production also rises over time, and the effect on GDP is negligible. As these effects differ markedly from the impact of oil price shocks, they suggest that as economies shift from fossil fuels to renewable electricity, business cycle dynamics may persistently change.

Publications

Household disagreement about expected inflation (with Salomé Fofana and Ricardo Reis)

In Research Handbook of Inflation, edited by Guido Ascari and Riccardo Trezzi, Edward-Elgar, chapter 15, June 2025. 

Draft version. CEPR discussion paper.

We survey the main facts that have emerged from research on disagreement between households on what they expect inflation to be. We document them using figures and correlations that capture: the statistical regularities on the observable drivers of disagreement, the measurement of residual disagreement, the usefulness of disagreement to forecast inflation, the response of disagreement to shocks, the disagreement between households and professionals, and the relation between disagreement, risk, and uncertainty.

Data and figures: GitHub

Work in progress

• Banking and economic synchronization: insights from micro data (with Jin Cao, Ragnar Juelsrud, and Karolis Liaudinskas)

• Commodity shocks, inflation, and expectations (with Ryan Banerjee and Boris Hofmann)

• Electrified business cycles

Data

Household disagreement about expected inflation: Measures of disagreement from the Michigan Survey of Consumers (MSC), the FRB New York Survey of Consumer Expectations (SCE), and the ECB Consumer Expectations Survey (CES). Data and figures are based on public sources and will be updated regularly.

See the website and GitHub repository for details.

Conferences

London Macro PhD Workshop: I co-organise a workshop for PhD students working on Macroeconomics who are based in or around London. The first edition will take place on 14 November 2025.