Macroeconomic policy games

Martin Bodenstein, Luca Guerrieri and Joe LaBriola ()

Journal of Monetary Economics, 2019, vol. 101, issue C, 64-81

Abstract: We develop a toolbox that characterizes the welfare-maximizing cooperative Ramsey policies under full commitment and open-loop Nash games between policymakers. We adopt the timeless perspective. Two examples for the use of our toolbox offer novel results. The first example revisits the case of monetary policy coordination in a two-country model to highlight sensitivity to the choice of policy instruments. For the second example, a central bank and a macroprudential policymaker are assigned distinct objectives in a model with financial frictions. Lack of cooperation can lead to large welfare losses even if technology shocks are the only source of fluctuations.

Keywords: Optimal policy; Strategic interaction; Welfare analysis; Monetary policy cooperation; Macroprudential regulation (search for similar items in EconPapers)
JEL-codes: E44 E61 F42 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (30)

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Working Paper: Macroeconomic Policy Games (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:moneco:v:101:y:2019:i:c:p:64-81

DOI: 10.1016/j.jmoneco.2018.07.015

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