The research reported here goes somewhat beyond mainstream monetary economics
to investigate this issue of how economic performance might be enhanced by reducing the
trend rate of inflation. The paper explores an idea that has been advanced by economists
such as Heymann and Leijonhufvud (1995), namely that inflation might impede the market
mechanisms responsible for coordinating economic activities (see also Ragan, 1998).
Strictly speaking, this idea cannot be investigated in a conventional rational-expectationsequilibrium
framework because the concept of rational-expectations equilibrium presupposes
that peoples' actions and beliefs are always perfectly coordinated without the need for any
explicit mechanism. We therefore exploit a less conventional methodology, namely that of
agent-based computational economics (ACE)