An evolutionary theory of the convergence towards low inflation rates

This 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...

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Bibliographic Details
Published inJournal of evolutionary economics Vol. 15; no. 1; pp. 51 - 64
Main Authors d’Artigues, Agnés, Vignolo, Thierry
Format Journal Article
LanguageEnglish
Published Heidelberg Springer Nature B.V 01.03.2005
Subjects
Behavior
Economic behaviour
Economic models
Equilibrium
Evolution
Evolutionary economics
Game theory
Inflation
Inflation rate
International
Mathematical methods
Monetary economics
Monetary policy
Private sector
Rationality
Studies
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Summary:This 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. [PUBLICATION ABSTRACT]
Bibliography:ObjectType-Article-2
SourceType-Scholarly Journals-1
ObjectType-Feature-1
content type line 23
ISSN:0936-9937
1432-1386
DOI:10.1007/s00191-004-0195-y