Heterogeneous Attention to Inflation and Monetary Policy

Abstract

We study how heterogeneous attention to inflation affects monetary policy transmission. Firstly, we empirically show that households’ attention to inflation varies with socio-demographic characteristics using household-level survey data for the US and Australia. Given that some prices are salient, we also measure shock-specific attention. Secondly, we study how differential attention to inflation through the formation of inflation expectations affects monetary policy transmission. For this purpose, we introduce a sparsity-based maximization operator into a two-asset HANK model calibrated to match empirical evidence for both countries.

Mary Tzaawa-Krenzler

Ph.D. student in Economics

My research focuses on information and behavioral frictions in general equilibrium models, household heterogeneity and monetary policy.