Inflation Levels and (In)Attention.

This article investigates the relationship between consumer attention to inflation and the level of inflation, proposing the Attention–Inflation Hypothesis which posits that attention increases as inflation rises. Using two novel, direct measures of inattention derived from U.S. Michigan Surveys of Consumers and European Union consumer surveys—namely, the share of respondents who say "Don't know" when asked about current inflation and the magnitude of errors in inflation estimates—the study finds consistent evidence that consumers pay more attention during periods of higher inflation. The analysis controls for prior uncertainty and demographic factors, and further explores media reporting as a channel influencing attention. The findings have important implications for macroeconomic dynamics, suggesting that varying attention levels contribute to the flattening of the Phillips curve and may generate upward attention-price spirals, affecting both consumer and firm inflation expectations.