Competition Versus Cooperation in Fiscal Policy Games with and without Policy Commitment

Gangsun Rhee
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Gangsun Rhee: Cheju National University

Korean Economic Review, 1994, vol. 10, 23-38

Abstract: This paper studies the cooperation-versus-competition issue in two different fiscal policy games. Considering the circumstance that the wealthy capital- exporting country (CEC) unilaterally makes foreign direct investment (FDI) to the capital-importing countries (CIC's), it first shows that in the open loop policy game where long- term policy commitment is available, cooperation among the CIC's better off than competition at the expense of the CEC. Secondly, it briefly shows that the result of the open loop policy game may not hold in the dosed loop policy game where any long- term policy commitment is not available.

Date: 1994
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