EMPCT WORKING PAPER SERIES
The EMPCT Working Paper Series is a collection of recent research publications or working papers by the scholars affiliated with the Empirical Macroeconomics Policy Center of Texas.
Attention to the Macroeconomy
EMPCT Working Paper Series No. 2025-03
74 pages | PDF Download | PDF in Browser
Link, Sebastian, Peichl, Andreas, Pfauti, Oliver, Roth, Christopher, Wohlfart, Johannes, “Attention to the Macroeconomy”, March 2025
We collect novel measures of households’ and firms’ attention to the economy using open- ended survey questions, fielded during a large shock to inflation, and test the predictions of theories of rational, goal-optimal attention allocation. We find support for several predictions of such theories: attention to the macroeconomy exhibits large and persistent cross-sectional heterogeneity, which is related to agents’ degree of exposure to the economy and measures of information costs; attention to the macroeconomy responds strongly to shocks; more attentive respondents adjust their inflation expectations more frequently during the shock, are more confident in their beliefs, and hold smaller misperceptions about realized inflation. However, at odds with goal-optimality of attention, more attentive agents’ expectations about future inflation deviate more strongly from expert benchmarks. To explain these patterns, we present a model of selective memory, in which attention can be “non-goal-optimal”. In this model, prior experiences shape both attention allocation and belief formation, and attention to other variables can spill over to inflation expectations. We confirm these additional predictions in our data.
| Reference No. | Title | Author(s) | Download |
|---|---|---|---|
| 2025-03 | Attention to the Macroeconomy | Sebastian Link, Andreas Peichl, Oliver Pfauti, Christopher Roth, Johannes Wohlfart | PDF, 1MB |
| 2025-02 | Fast and Slow Technological Transitions | Rodrigo Adão, Martin Beraja, Nitya Pandalai-Nayar | PDF, 2.2MB |
| 2025-01 | How Costly Are Business Cycle Volatility and Inflation? A Vox Populi Approach | Georgarakos, Dimitris, Kwang Hwan Kim, Olivier Coibion, Myungkyu Shim, Myunghwan Andrew Lee, Yuriy Gorodnichenko, Geoff Kenny, Seowoo Han, and Michael Weber | PDF, 1.3MB |
| 2024-01 | Keeping Up with the Jansens: Causal Peer Effects on Household Spending, Beliefs and Happiness | Maarten van Rooij, Olivier Coibion, Dimitris Georgarakos, Bernardo Candia, and Yuriy Gorodnichenko | PDF, 2.1 MB |
| 2024-02 | The Inflation Attention Threshold and Inflation Surges | Oliver Pfäuti | PDF, 1.8 MB |
| 2024-03 | Illiquid Lemon Markets and the Macroeconomy | Aimé Bierdel, Andres Drenik, Juan Herreño, Pablo Ottonello | PDF, 10 MB |
| 2024-04 | Relative-Price Changes as Aggregate Supply Shocks Revisited: Theory and Evidence | Hassan Afrouzi, Saroj Bhattarai, and Edson Wu | PDF, 1.5 MB |
| 2024-05 | Monetary Policy without Moving Interest Rates: The Fed Non-Yield Shock | Christoph E. Boehm and T. Niklas Kroner | PDF, 1.4 MB |
| 2024-06 | Concentration,Market Power, andMisallocation: The Role of Endogenous Customer Acquisition* | Hassan Afrouzi, Andres Drenik, and Ryan Kim | PDF, 5.9 MB |
| 2024-07 | Playing with blocs: Quantifying decoupling | Barthélémy Bonadio, Zhen Huo, Elliot Kang, Andrei A. Levchenko, Nitya Pandalai-Nayar, Hiroshi Toma, Petia Topalova | PDF, 4.2MB |
| 2024-08 | Weathering the Storm: Supply Chains and Climate Risk | Juanma Castro-Vencenzi, Gaurav Khanna, Nicolas Morales, Nitya Pandalai-Nayar, | PDF, 11.7 MB |
| 2024-09 | Dynamic Models, New Gains from Trade? | Christoph E. Boehm, Andrei A. Levchenko, Nitya Pandalai-Nayar, Hiroshi Toma | PDF, 780.3 KB |
