Attention-Dependent Monetary Transmission to Household Beliefs

Jaemin Jeong (), Eunseong Ma and Choongryul Yang

No 2026-9, FRB Atlanta Working Paper from Federal Reserve Bank of Atlanta

Abstract: The expectations channel of monetary policy is state dependent because households endogenously adjust attention to macroeconomic conditions. We develop a behavioral framework in which attention trades off forecast accuracy against cognitive cost, so monetary policy operates through an expectations multiplier. Using the Michigan Survey, we proxy attentiveness from whether households’ reading of business conditions matches realized outcomes, measured before identified policy shocks arrive. Policy news moves inflation beliefs primarily among attentive households, especially those with greater economic exposure; others barely respond. In the aggregate, pass-through scales with attentiveness and strengthens in recessions and high-uncertainty periods, making monetary transmission nonlinear.

Keywords: inflation expectations; monetary policy transmission; rational inattention; state dependence; expectations multipliers (search for similar items in EconPapers)
JEL-codes: E31 E32 E52 E58 E70 (search for similar items in EconPapers)
Pages: 84
Date: 2026-07-14
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Related works:
Working Paper: Attention-Dependent Monetary Transmission to Household Beliefs (2025)
Working Paper: Attention-Dependent Monetary Transmission to Household Beliefs (2025)
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DOI: 10.29338/wp2026-09

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