01112nam a22001097a 4500008004100000100004600041245002500087260003400112300003500146520078700181773003400968220214b           ||||| |||| 00| 0 eng d  aKohlhas, Alexandre N. and Walther, Ansgar  aAsymmetric attention  aThe American Economic Review   a111(3), Sep, 2021: p.2879-2925  aWe document that the expectations of households, firms, and professional forecasters in standard surveys simultaneously extrapolate from recent events and underreact to new information. Existing models of expectation formation, whether behavioral or rational, cannot account for these observations. We develop a rational theory of extrapolation based on limited attention, which is consistent with this evidence. In particular, we show that limited, asymmetric attention to procyclical variables can explain the coexistence of extrapolation and underreactions. We illustrate these mechanisms in a microfounded macroeconomic model, which generates expectations consistent with the survey data, and show that asymmetric attention increases business cycle fluctuations. – Reproduced   aThe American Economic Review