Attention to the Macroeconomy

Sebastian Link, Andreas Peichl, Oliver Pfäuti (), Christopher Roth and Johannes Wohlfart ()
Additional contact information
Oliver Pfäuti: University of Texas at Austin
Johannes Wohlfart: Department of Economics and CEBI, University of Copenhagen, CESifo, Danish Finance Institute

No 256, ECONtribute Discussion Papers Series from University of Bonn and University of Cologne, Germany

Abstract: Attention to the economy plays a key role in canonical macro models, yet its empiri-cal properties are not well understood. We collect novel measures of attention to the economy based on open-ended survey questions. Our measures are included in tai-lored panel surveys of German firms and households, conducted before and during a large shock to inflation. Using these new datasets, we provide three sets of stylized facts. First, we describe the cross-sectional and time variation in attention to different aspects of the economy. Attention to the macroeconomy is characterized by large and persistent cross-sectional heterogeneity, responds strongly to changes in the economic environment, and is negatively correlated with attention to household- or firm-level topics. Second, we explore the link between attention and expectation formation. More attentive respondents are more likely to adjust inflation expectations during the shock, have higher confidence in their beliefs, and hold smaller misperceptions about realized inflation, yet their expectations about future inflation deviate more strongly from professional forecasts. Third, we study the role of experiences as a potential driver of attention. Consistent with similarity-based recall, individuals with past ex-periences of adverse inflation outcomes pay more attention to inflation in response to the shock.

Keywords: Attention; Expectation formation; Memory; Experiences; Inflation (search for similar items in EconPapers)
JEL-codes: D83 D84 E71 (search for similar items in EconPapers)
Pages: 82 pages
Date: 2023-09
New Economics Papers: this item is included in nep-ger and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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https://www.econtribute.de/RePEc/ajk/ajkdps/ECONtribute_256_2023.pdf Fourth version, 2025 (application/pdf)

Related works:
Working Paper: Attention to the Macroeconomy (2024)
Working Paper: Attention to the Macroeconomy (2024)
Working Paper: Attention to the Macroeconomy (2023)
Working Paper: Attention to the Macroeconomy (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:ajk:ajkdps:256

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