American Economic Review Vol. 116 No. 11 2026
The Inflation Attention Threshold and Inflation Surges
open access
Abstract
The recent inflation surge brought inflation back on people's minds. I quantify when and how much attention to inflation changes and derive the macroeconomic implications of these attention changes. I estimate an attention threshold at an inflation rate of 4 percent, that attention doubles when inflation exceeds this threshold, and that supply shocks have stronger and more persistent effects on inflation in times of high attention. Developing a model featuring the attention threshold, I show that attention changes offer a joint explanation for inflation surges, inflation's co-movement with inflation expectations, and a long last mile of disinflation.
- DOI
- 10.1257/aer.20250051
- Volume
- 116
- Issue
- 11
- Pages
- 4203-4242
- Language
- en
- Sources
- crossref openalex