Every Country for Itself and the Central Bank for Us All?

Reinhard Neck () and Dmitri Blueschke

International Advances in Economic Research, 2020, vol. 26, issue 4, No 4, 377-389

Abstract: Abstract This paper used a small stylized nonlinear three-country macroeconomic model of a monetary union to analyse the interactions between fiscal (governments) and monetary (common central bank) policymakers. The three fiscal players were divided into a financially stable core and a less stable periphery. The periphery itself consisted of two players with different perceptions of the trade-off between fiscal stability and output growth. Using the OPTGAME algorithm, solutions were calculated for two game strategies: one cooperative (Pareto optimal) and one non-cooperative game type (the Nash game for the feedback information pattern). Introducing a negative demand shock, the performance of different coalition options between players were analysed. A higher level of cooperation leads in general to a better overall outcome of the game, however, with highly varying burdens to be borne by the players.

Keywords: Dynamic game; Nash equilibrium; Pareto solution; Monetary union; Coalitions; Macroeconomics; Public debt (search for similar items in EconPapers)
JEL-codes: C54 C61 E27 E61 E63 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://link.springer.com/10.1007/s11294-020-09803-2 Abstract (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kap:iaecre:v:26:y:2020:i:4:d:10.1007_s11294-020-09803-2

Ordering information: This journal article can be ordered from
http://www.springer.com/economics/journal/11294

DOI: 10.1007/s11294-020-09803-2

Access Statistics for this article

International Advances in Economic Research is currently edited by Katherine S. Virgo

More articles in International Advances in Economic Research from Springer, International Atlantic Economic Society Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().