Consumers' Attention to Monetary Policy: The Importance of Having "Skin in the Game"

Ina Hajdini, Edward Knotek, James Mitchell, Mathieu Pedemonte and Taylor Shiroff

No 26-31, Working Papers from Federal Reserve Bank of Cleveland

Abstract: Using a five-year survey of over 170,000 US consumers, we provide a novel direct measure of attention to monetary policy and show that the data strongly support the predictions of a rational inattention model. First, attention is incentive-driven: consumers with "skin in the game"—those planning major purchases like homes or cars—are significantly more attentive to monetary policy news. Second, attention varies systematically with interest rate volatility and news supply, exhibiting cyclical patterns around FOMC meetings. Third, marginal effects of volatility and news supply decline with "skin in the game," implying external factors primarily affect low-skin-in-the-game consumers. These findings imply that, when communication is costly and attention is endogenous, optimal central bank communications in our model target consumers who bear the largest welfare losses from information frictions. This targeted communication approach increases aggregate attention to monetary policy, leading to an amplified response of consumption to interest rate changes.

Keywords: monetary policy; rational inattention; communication (search for similar items in EconPapers)
JEL-codes: D8 E5 (search for similar items in EconPapers)
Pages: 79 pages
Date: 2026-10-14
References: Add references at CitEc
Citations:

Downloads: (external link)
https://doi.org/10.26509/frbc-wp-202631 Persistent link (text/html)
https://www.clevelandfed.org/-/media/project/cleve ... pers/2026/wp2631.pdf Full text (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fedcwq:103975

Ordering information: This working paper can be ordered from

DOI: 10.26509/frbc-wp-202631

Access Statistics for this paper

More papers in Working Papers from Federal Reserve Bank of Cleveland Contact information at EDIRC.
Bibliographic data for series maintained by 4D Library ().