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

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.