Abstract
This paper develops a dynamic game model to study strategic interactions between the decision-makers in a monetary union. In such a union, governments of the participating countries pursue national goals when deciding on fiscal policies, whereas the common central bank’s monetary policy aims at union-wide objective variables. Considering the example of a negative demand shock, we show how different solution concepts for the dynamic game between the common central bank and the national governments can be used as models of a conflict between national and supra-national institutions (noncooperative Nash equilibrium) and of coordinated policy-making (cooperative Pareto solutions).
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References
Basar T., Olsder G. J. (1999) Dynamic Noncooperative Game Theory, 2nd edn.SIAM, Philadelphia
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Behrens D. A., Neck R. (2002) Approximating Equilibrium Solutions of MultiPlayer Difference Games Using the OPTGAME Algorithm. Working paper, University of Klagenfurt
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© 2003 Springer-Verlag Berlin Heidelberg
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Behrens, D.A., Neck, R. (2003). Optimal Decision Rules in a Monetary Union. In: Leopold-Wildburger, U., Rendl, F., Wäscher, G. (eds) Operations Research Proceedings 2002. Operations Research Proceedings 2002, vol 2002. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-55537-4_71
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DOI: https://doi.org/10.1007/978-3-642-55537-4_71
Publisher Name: Springer, Berlin, Heidelberg
Print ISBN: 978-3-540-00387-8
Online ISBN: 978-3-642-55537-4
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