Brazilian inflation and the theory of games

Uwe Haneke ()

Brazilian Journal of Political Economy, 1995, vol. 15, issue 4, 547-562

Abstract: Based on the disaggregation of the private sector as an amplification of the well--known Barro & Gordon policy-game model, a coordination and/or cooperation problemof the price-setters in the private sector is identified as a possible cause for the persistenceof inflation even during stabilization efforts. This kind of persistence is, at least in the short--term, independent from the willingness of the government to stop inflation. A process ofself-fulfilling prophecies is started by the “wait-and-see” behavior of private sector’s price--setters, which can result in the giving up of the stabilization policy. Breaking this “wait-and--see” behavior could be one of the major problems in stabilizing economies with chronichigh inflation. JEL Classification: E31; C70.

Keywords: Inflation; game theory; stabilization (search for similar items in EconPapers)
Date: 1995
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