Inflation Expectations in a Limited Rationality Environment: a discrete choice approach

Authors

  • Helberte João França Almeida Universidade Federal de Santa Catarina. Departamento de Economia e Relações Internacionais http://orcid.org/0000-0003-0163-0197
  • Jaylson Jair da Silveira Universidade federal de Santa catarina. Departamento de Economia e Relações Internacionais

DOI:

https://doi.org/10.1590/0101-41614731haj

Keywords:

Heterogeneous inflation expectations, Dispersion in cognitive abilities, Agent-based computational models

Abstract

We propose a discrete (ternary) choice model to study the frequency distribution of inflation predictors. In every reappraisal period of the foresight strategies, each agent chooses only one among three predictors (naive, adaptive and VAR) to forecast the monthly inflation rate. The
predictor selection process is modeled as a discrete choice dynamics based on two attributes, namely, accuracy less the average cost predictor (private attributes) and dispersion in cognitive abilities. The calibrated agent-based computational model shows that heterogeneity in inflation expectations is persistent, that is, less accurate predictors coexist with the most accurate
predictor due to the dispersion in cognitive abilities of agents.

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Author Biography

  • Helberte João França Almeida, Universidade Federal de Santa Catarina. Departamento de Economia e Relações Internacionais

    Professor

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Published

30-09-2017

Issue

Section

Articles

How to Cite

Almeida, H. J. F., & Silveira, J. J. da. (2017). Inflation Expectations in a Limited Rationality Environment: a discrete choice approach. Estudos Econômicos (São Paulo), 47(3), 465-486. https://doi.org/10.1590/0101-41614731haj