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Inflation Levels and (In)Attention

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Abstract

Inflation expectations are key determinants of economic activity and are central to the current policy debate about whether inflation expectations will remain anchored in the face of recent pandemic-related increases in inflation. This paper explores evidence of inattention by constructing two different measures of consumers’ inattention and documents greater inattention when inflation is low. This suggests that there is indeed a risk of an acceleration in the increases in inflation expectations if actual inflation remains high.

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  • Anat Bracha & Jenny Tang, 2022. "Inflation Levels and (In)Attention," Working Papers 22-4, Federal Reserve Bank of Boston.
    • Handle: RePEc:fip:fedbwp:93857
    DOI: 10.29412/res.wp.2022.04
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    Cited by:

    1. Dietrich, Alexander M., 2023. "Consumption categories, household attention, and inflation expectations: Implications for optimal monetary policy," University of Tübingen Working Papers in Business and Economics 157, University of Tuebingen, Faculty of Economics and Social Sciences, School of Business and Economics.
    2. Massimiliano Marcellino & Dalibor Stevanovic, 2022. "The demand and supply of information about inflation," CIRANO Working Papers 2022s-27, CIRANO.

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    More about this item

    Keywords

    inattention; inflation expectations; expectation anchoring;
    All these keywords.

    JEL classification:

    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E70 - Macroeconomics and Monetary Economics - - Macro-Based Behavioral Economics - - - General

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