Daily Events
14:00 | Room 402 | Macro Research Seminar
Ina Hajdini (Federal Reserve Bank of Cleveland) "Consumers’ Attention to Monetary Policy"
Federal Reserve Bank of Cleveland, Unites States
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Meeting number: 2742 840 6372
Meeting password: 662753
Abstract: We provide novel evidence of US consumers’ attention to monetary policy in a survey spanning five years and more than 170,000 consumers. Our survey allows us to test distinct implications of rational inattention models in which heterogeneous consumers optimally decide how much information to acquire about interest rates. We find strong empirical evidence in favor of the model’s implications in the US data and highlight four key results. First, those consumers that plan to make a big-ticket purchase, such as buying a car or house, are much more attentive to news about monetary policy because they have “skin in the game.” Second, attention to monetary policy varies over time and increases with interest rate volatility. Third, consumers’ attention to monetary policy increases with the supply of news about monetary policy. Fourth, in periods of high volatility or when the cost of acquiring monetary policy news is low, those consumers with less “skin in the game” increase their attention by more than those consumers who already have “skin in the game.” We discuss the implications of our findings for monetary policy communication.
