òòò½Íø Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
The Inflation Attention Threshold and Inflation Surges
òòò½Íø Review
(pp. 4203–42)
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.Citation
Pfäuti, Oliver. 2026. "The Inflation Attention Threshold and Inflation Surges." òòò½Íø Review 116 (11): 4203–42. DOI: 10.1257/aer.20250051Additional Materials
JEL Classification
- D84 Expectations; Speculations
- E12 General Aggregative Models: Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
- E31 Price Level; Inflation; Deflation
- E43 Interest Rates: Determination, Term Structure, and Effects
- E52 Monetary Policy