Inflation Targeting Regimes in Emerging Market Economies: To Invest or Not to Invest?

Autor:	Silveira, Douglas, Oscar, Ricardo B. L. M.
Předmět:	PRICE inflation INFLATION targeting INVESTMENT policy EMERGING markets DECISION making
Zdroj:	Computational Economics; Oct2024, Vol. 64 Issue 4, p2097-2129, 33p
Abstrakt:	We propose a stochastic learning rule through an Agent-based model to understand how emerging market economies (EMEs) can achieve high levels of investment, given the announced inflation target rate. The central banks act as a pseudo-player, choosing between the pursued target inflation rate or a negative inflation rate. By taking this action as given, bounded-rational firms and workers iteratively play a two-population well-mixed evolutionary game to make investment decisions. Our findings show that when inflation converges to its target, the less the central planners' effort to reach a steady state with investment coordination. When central banks target a negative inflation rate, it can speed up the EMEs' convergence to a steady-state with agents coordinating their investment strategies. It shed some light on central banks' transparency and credibility to avoid the so-called debt-deflation spiral, which typically increases the uncertainty in EMEs, limiting the investments in the economy. [ABSTRACT FROM AUTHOR]
Databáze:	Complementary Index
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