American Economic Review· 2026Q1
The Inflation Attention Threshold and Inflation Surges
- 24citations
- Q1SCImago
- 2026year
Short summary
Inflation attention doubles when the inflation rate exceeds 4%, leading to stronger and more persistent supply shock effects.
AI-generated from the title and abstract; the full text is not read.
Key points
- An attention threshold for inflation was estimated at 4%.
- Inflation attention doubles when the inflation rate exceeds 4%.
- Supply shocks have stronger and more persistent effects on inflation during periods of high attention.
- Changes in attention explain inflation surges, co-movement with expectations, and the 'long last mile' of disinflation.
AI-generated from the title and abstract; the full text is not read.
Abstract
The recent inflation surge brought inflation back on people's minds. I quantify when and how much attention to inflation changes and derive the macroeconomic implications of these attention changes. I estimate an attention threshold at an inflation rate of 4 percent, that attention doubles when inflation exceeds this threshold, and that supply shocks have stronger and more persistent effects on inflation in times of high attention. Developing a model featuring the attention threshold, I show that attention changes offer a joint explanation for inflation surges, inflation's co-movement with inflation expectations, and a long last mile of disinflation. (JEL D84, E12, E31, E43, E52)
The authors' abstract, as published at the source. American Economic Review, 2026 · DOI ↗
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Field: General Economics, Econometrics and Finance
General Economics, Econometrics and FinanceEconomics, Econometrics and Finance