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Inflation Levels and (In)Attention
[On a System of Inequalities in Demand Analysis: An Extension of the Classical Method]

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  • Anat Bracha
  • Jenny Tang

Abstract

Inflation expectations are key determinants of economic activity and are central to the current policy debate about whether inflation expectations will remain anchored in the face of recent pandemic-related increases in inflation. This article explores evidence of inattention by constructing two novel and direct measures of consumers’ inattention, and documents greater attention when inflation is high. This relationship can explain a substantial portion of the flattening of the Phillips curve and also suggests the possibility of upward attention-price spirals.

Suggested Citation

  • Anat Bracha & Jenny Tang, 2025. "Inflation Levels and (In)Attention [On a System of Inequalities in Demand Analysis: An Extension of the Classical Method]," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 92(3), pages 1564-1594.
    • Handle: RePEc:oup:restud:v:92:y:2025:i:3:p:1564-1594.
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    Cited by:

    1. Łyziak, Tomasz & Pedersen, Michael & Stanisławska, Ewa, 2025. "Consumer inflation expectations and local price changes: Learning from experience," Journal of Macroeconomics, Elsevier, vol. 86(C).
    2. Benchimol, Jonathan & Bounader, Lahcen & Dotta, Mario, 2025. "Estimating Behavioral Inattention," Journal of Economic Behavior & Organization, Elsevier, vol. 236(C).
    3. repec:rbz:wpaper:11103 is not listed on IDEAS
    4. Jang, Chul & Park, Seyoung, 2026. "Inflation attention and optimal decisions: Consumption/savings puzzle and asset prices," Economics Letters, Elsevier, vol. 261(C).
    5. Matthieu Bussière & Johanna Gilbert & Olesya V. Grishchenko, 2026. "The Role of Inflation Perceptions in Consumer Inflation Expectations: Evidence from the Euro Area," Finance and Economics Discussion Series 2026-038, Board of Governors of the Federal Reserve System (U.S.).
    6. Guillochon, Justine & Ellen, Saskia ter, 2025. "Inflation concern, attention and central bank trust," Journal of Economic Behavior & Organization, Elsevier, vol. 239(C).

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