The Effect of Inflation on Business Investment Decisions in Emerging Economies

This article seeks to comprehend, in light of the declared inflation target rate, under what circumstances A large amount of investment might end up in emerging market economies (EMEs). Because of this, we use an Agent-based Computational Economics (ACE) model to include a stochastic learning rule into the game that Asako et al. (2017) presented. Making investment choices is like playing a stage game, and entrepreneurs and workers do it repeatedly. The underlying assumption is that investments are mutually supportive, and that several evolutionary equilibrium solutions are possible. To boost predicted profits, I. investments must be innovative and create demand, and (ii) the central bank's proclaimed target inflation rate must be credible. If we want to steer the EMEs to the long-run equilibrium, where everyone invests at the goal inflation rate, we need these conditions. Two main areas are mainly impacted by our ACE and EGT learning models.