Working Paper: NBER ID: w31485
Authors: Michael Weber; Bernardo Candia; Tiziano Ropelé; Rodrigo Lluberas; Serafin Frache; Brent H. 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 whether the economic environment affects how agents learn from new information. We show that as inflation rose in advanced economies, both households and firms became more attentive and informed about publicly available news 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; Learning; Randomized Control Trials; Economic Environment
JEL Codes: E3; E40; E50
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| inflation levels (E31) | households and firms become more informed about inflation (D83) |
| households and firms become more informed about inflation (D83) | responsiveness to new information decreases (D83) |
| inflation levels (E31) | responsiveness to new information decreases (D83) |
| high inflation environments (E31) | firms show minimal response to information treatments (L20) |
| low inflation environments (E31) | firms respond strongly to information treatments (L20) |
| inflation environments (E31) | attention varies (D91) |