  I propose an approach to quantify attention to inflation in the data and show
that the decrease in the volatility and persistence of U.S. inflation after the
Great Inflation period was accompanied by a decline in the public's attention
to inflation. This decline in attention has important implications (positive
and normative) for monetary policy as it renders managing inflation
expectations more difficult and can lead to inflation-attention traps:
prolonged periods of a binding lower bound and low inflation due to
slowly-adjusting inflation expectations. As attention declines the optimal
policy response is to increase the inflation target. Accounting for the lower
bound fundamentally changes the normative implications of declining attention.
While lower attention raises welfare absent the lower-bound constraint, it
decreases welfare when accounting for the lower bound.
