Working Paper
Attention-Dependent Monetary Transmission to Household Beliefs
Abstract: The expectations channel of monetary policy is state dependent because households endogenously adjust attention to macroeconomic conditions. We develop a behavioral framework in which attention trades off forecast accuracy against cognitive cost, so monetary policy operates through an expectations multiplier. Using the Michigan Survey, we proxy attentiveness from whether households’ reading of business conditions matches realized outcomes, measured before identified policy shocks arrive. Policy news moves inflation beliefs primarily among attentive households, especially those with greater economic exposure; others barely respond. In the aggregate, pass-through scales with attentiveness and strengthens in recessions and high-uncertainty periods, making monetary transmission nonlinear.
JEL Classification: E31; E32; E52; E58; E70;
https://doi.org/10.29338/wp2026-09
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Bibliographic Information
Provider: Federal Reserve Bank of Atlanta
Part of Series: FRB Atlanta Working Paper
Publication Date: 2026-07-14
Number: 2026-9