Performativity of Economics and the New Consensus Macroeconomics: the case of the Inflation Targeting Regime in Brazil

A performatividade da Economia e o Novo Consenso Macroeconômico: o caso do Regime de Metas de Inflação no Brasil

Abstract

The notion of performativity suggests that scientific theories contribute to shaping what they describe, through sociotechnical agencements and their devices. In this paper, we aim to find out whether monetary policy in Brazil under the Inflation Targeting Regime, oriented by the New Consensus Macroeconomics, constitutes a case of performativity of economics. The hypothesis is that monetary authorities, as sociotechnical agencies, have the capability to affect agents’ expectations through their devices, including the belief in the model that describes the appropriate economic behavior for things to be as they are. We found out that the theory’s recommendations were put into practice and made a difference in the Brazilian economy. However, the resulting process of coordination of expectations perpetuates high interest rates, and this conventional regime ends up blocking the results that should be achieved with the appropriate policy. This constitutes a case of counterperformativity of economics.

Keywords:
Inflation Targeting; New Consensus Macroeconomics; Performativity; Monetary Policy; Brazilian Economy