1 Booth School of Business, U. Chicago · 2 NBER · 3 Department of Economics, University of California, Berkeley · 4 Department of Economics, Columbia University , · 5 Directorate General for Economics, Statistics, and Research, Bank of Italy · 6 Facultad de Ciencias Empresariales y Economia, Department of Economics, Universidad ORT Uruguay · 7 Facultad de Ciencias Empresariales y Economia, Universidad de Montevideo · 8 Research Department, Federal Reserve Bank of Atlanta · 9 School of Economics, Auckland University of Technology · 10 CEPR , · 11 Directorate General Research, European Central Bank · 12 Department of Economics, University of Texas - Austin · 13 Research Department, Banco Central del Uruguay
open access
Abstract
Using randomized control trials (RCTs) applied over time in different countries, we study whether the economic environment affects how agents learn from new information. We show that as inflation rose in advanced economies, both households and firms became more attentive and informed about publicly available news about inflation, leading them to respond less to exogenously provided information about inflation and monetary policy. We also study the effects of RCTs in countries where inflation has been consistently high (Uruguay) and low (New Zealand) as well as what happens when the same agents are repeatedly provided information in both low‐ and high‐inflation environments (Italy). Our results broadly support models in which inattention is an endogenous outcome that depends on the economic environment.