Working Paper: CEPR ID: DP18299
Authors: Michael Weber; Bernardo Candia; Tiziano Ropele; Rodrigo Lluberas; Serafin Frache; Brent Meyer; Saten Kumar; Yuriy Gorodnichenko; Dimitris Georgarakos; Olivier Coibion; Geoff Kenny; Jorge Ponce
Abstract: Using randomized control trials (RCTs) applied over time in different countries, we study how the economic environment affects how agents learn from new information. We show that as inflation has recently risen in advanced economies, both households and firms have become more attentive and informed about inflation, leading them to respond less to exogenously provided information about inflation and monetary policy. We also study the effects of RCTs in countries where inflation has been consistently high (Uruguay) and low (New Zealand) as well as what happens when the same agents are repeatedly provided information in both low- and high-inflation environments (Italy). Our results broadly support models in which inattention is an endogenous outcome that depends on the economic environment.
Keywords: inflation expectations; rational inattention; randomized controlled trial (RCT)
JEL Codes: E3; E4; E5
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| inflation (E31) | attentiveness (D91) |
| inflation (E31) | information awareness (D83) |
| information awareness (D83) | responsiveness to new information (D83) |
| inflation (E31) | responsiveness to new information (D83) |