An evolutionary theory of the convergence towards low inflation rates
AbstractThis paper presents an evolutionary interpretation of Barro-Gordon’s monetary policy game. The model describes a multi-country setup where governments and private agents are boundedly rational players. The behavioral rule of players’ decisions leads to the imitation of the strategy giving the highest payoff. In this evolutionary monetary policy game, we show how a low inflation state is reached from an international context dominated by inflationary policies. The analysis explains the convergence towards low inflation rates observed during the past twenty years. Moreover, the low inflation state appears to be the long-run equilibrium of the game under some conditions featuring the observed macroeconomic context. Copyright Springer-Verlag Berlin/Heidelberg 2004
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Bibliographic InfoArticle provided by Springer in its journal Journal of Evolutionary Economics.
Volume (Year): 15 (2004)
Issue (Month): 1 (January)
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Web page: http://link.springer.de/link/service/journals/00191/index.htm
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- Jan Libich, 2006. "Inflexibility Of Inflation Targeting Revisited: Modeling The "Anchoring"Effect," CAMA Working Papers 2006-02, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
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