Attention, Please! Listening to the Central Bank in Uncertain Times

Silvia Albrizio, Allan Dizioli, Pedro Simon and Yifan Zhang

AEA Papers and Proceedings, 2025, vol. 115, 254-60

Abstract: This paper investigates how firms' attention to central banks influences monetary policy transmission under varying macroeconomic uncertainty. The paper utilizes the earnings calls-based firm inflation expectations index and a novel attention indicator at the firm level in the empirical analysis. Attention amplifies the impact of monetary policy in low-uncertainty environments, but this effect dissipates during periods of high uncertainty. An extended rational inattention model with a central bank signal explains these findings. The model predicts that, in high-uncertainty environments, firms are already well-informed, and there is less new information from the Central Bank.

JEL-codes: D22 D84 E31 E52 E58 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1257/pandp.20251017

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