When are households rationally attentive to information from the central bank? The role of macroeconomic uncertainty

Abstract

This paper analyzes consumers' endogenous choice to obtain central bank information and evaluates how this choice interacts with an exogenous macroeconomic uncertainty shock. The results show that consumers are more attentive to central bank communication when their stakes are higher, for instance because they own a mortgage, or when the cost of attention is lower, for instance because they are better educated or more literate. An exogenous uncertainty shock further increases attention, and this effect is particularly pronounced for those who have lower prior information, lower costs of attention and higher stakes in the information problem. We rationalize these results in the context of a rational inattention model and show how endogenous information shocks and the exogenous uncertainty shock impact the formation of macroeconomic expectations and consumer spending choices.