Googling ‘inflation’: Household inflation attention across the euro area

Christian Buelens

European Journal of Political Economy, 2025, vol. 89, issue C

Abstract: This paper investigates the dynamics of household inflation attention in the euro area, using internet searches as a direct measure of inflation attention. It identifies different inflation attention-regimes dependent on the inflation context, aligning with the theory of rational inattention. Additionally, the paper finds that changes in monetary policy raise inflation attention in some euro area countries, indicating that households perceive a connection between monetary policy decisions and inflation. The analysis further reveals significant heterogeneity in inflation attention patterns across euro area countries, evident in three dimensions: (i) varying levels of structural inflation attention, seemingly linked to national inflation aversion; (ii) varying sensitivities of inflation attention to changes in inflation and inflation volatility, and differing thresholds at which the sensitivity of attention to inflation increases; (iii) asymmetric responses of national inflation attention to monetary policy announcements. Finally, the paper provides evidence of a structural increase in inflation attention after the post-pandemic inflation surge, along with a general decrease in attention thresholds. A better understanding of the factors driving inflation attention and its cross-country variation can help policymakers in a monetary union to enhance and better target their communication on inflation.

Keywords: Inflation; Attention; Rational inattention; Expectations; Search engine; Google trends; Central banks; Monetary policy (search for similar items in EconPapers)
JEL-codes: C82 D83 D84 E31 E52 E58 E7 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:poleco:v:89:y:2025:i:c:s017626802500062x

DOI: 10.1016/j.ejpoleco.2025.102702

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