The Rockets and Feathers of Inflation Attention

Oleg Korenok and David Munro

No 1463, GLO Discussion Paper Series from Global Labor Organization (GLO)

Abstract: Prior research has documented that attention to inflation shifts when inflation surpasses a 3-4% threshold. In this note we examine how attention to inflation declines in episodes of disinflation. We show that for countries where inflation has returned to "normal" (pre-threshold) levels, attention remains 2-3 times higher than it was before the run-up of inflation. We show evidence that wage growth is more strongly correlated with past inflation when attention is high. This is one possible mechanism behind the slower-than-expected disinflation in late 2023 and early 2024.

Keywords: inflation; attention; persistence; threshold (search for similar items in EconPapers)
JEL-codes: E31 E52 E70 (search for similar items in EconPapers)
Date: 2024
New Economics Papers: this item is included in nep-mon
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:glodps:1463

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