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Tell Me Something I don't Already Know: Learning in Low and High-inflation Settings

Author

Listed:
  • Weber, Michael
  • Candia, Bernardo
  • Ropele, Tiziano
  • Lluberas, Rodrigo
  • Frache, Serafin
  • Meyer, Brent
  • Kumar, Saten
  • Gorodnichenko, Yuriy
  • Georgarakos, Dimitris
  • Coibion, Olivier
  • Kenny, Geoff
  • Ponce, Jorge

Abstract

Using randomized control trials (RCTs) applied over time in different countries, we study how the economic environment affects how agents learn from new information. We show that as inflation has recently risen in advanced economies, both households and firms have become more attentive and informed about inflation, leading them to respond less to exogenously provided information about inflation and monetary policy. We also study the effects of RCTs in countries where inflation has been consistently high (Uruguay) and low (New Zealand) as well as what happens when the same agents are repeatedly provided information in both low- and high-inflation environments (Italy). Our results broadly support models in which inattention is an endogenous outcome that depends on the economic environment.

Suggested Citation

  • Weber, Michael & Candia, Bernardo & Ropele, Tiziano & Lluberas, Rodrigo & Frache, Serafin & Meyer, Brent & Kumar, Saten & Gorodnichenko, Yuriy & Georgarakos, Dimitris & Coibion, Olivier & Kenny, Geoff, 2023. "Tell Me Something I don't Already Know: Learning in Low and High-inflation Settings," CEPR Discussion Papers 18299, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:18299
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    Cited by:

    1. Schnorpfeil, Philip & Weber, Michael & Hackethal, Andreas, 2023. "Households' response to the wealth effects of inflation," SAFE Working Paper Series 400, Leibniz Institute for Financial Research SAFE.
    2. Philip Schnorpfeil & Michael Weber & Andreas Hackethal, 2024. "Inflation and Trading," NBER Working Papers 32470, National Bureau of Economic Research, Inc.
    3. Oliver Pfauti, 2023. "The Inflation Attention Threshold and Inflation Surges," Papers 2308.09480, arXiv.org, revised Aug 2024.
    4. Daria Minina & Gabriele Galati & Richhild Moessner & Maarten van Rooij, 2024. "The effect of information on consumer inflation expectations," Working Papers 810, DNB.

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    More about this item

    Keywords

    Inflation expectations; Rational inattention; Randomized controlled trial (rct);
    All these keywords.

    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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