Attention, Please! Listening to the Central Bank in Uncertain Times
This paper investigates how firms' attention to central banks influences monetary policy transmission under varying macroeconomic uncertainty. The paper utilizes the earnings calls-based firm inflation expectations index and a novel attention indicator at the firm level in the empirical analysis. Attention amplifies the impact of monetary policy in low-uncertainty environments, but this effect dissipates during periods of high uncertainty. An extended rational inattention model with a central bank signal explains these findings. The model predicts that, in high-uncertainty environments, firms are already well-informed, and there is less new information from the Central Bank.
Authors
- Silvia Albrizio
- Allan Dizioli (ORCID: https://orcid.org/0000-0001-7367-8814)
- Pedro Simon
- Yifan Zhang (ORCID: https://orcid.org/0000-0003-1849-7484)
Institutions
- International Monetary Fund (US)
- University of Illinois Urbana-Champaign (US)
- Norwegian School of Economics (NO)
Publication Details
- Journal
- AEA Papers and Proceedings
- Published
- 2025-05-01
- DOI
- https://doi.org/10.1257/pandp.20251017
- Primary Topic
- Economic Theory and Policy
- Type
- article
- Field-Weighted Citation Impact
- 0.00