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.