Fiscal- Monetary Policy and Debt Management: a Two Stage Dynamic Analysis

Giovanni Di Bartolomeo () and Debora Di Gioacchino

No 74, Working Papers in Public Economics from Department of Economics and Law, Sapienza University of Roma

Abstract: This paper studies the interaction between two autonomous policymakers, the central bank and the government, in managing public debt as the result of a two-stage game. In the first stage the institutional regime is established. This determines the equilibrium solution to be applied in the second stage, in which a differential game is played between the two policymakers. It is shown that, if the policymakers can communicate before the game is played, (multiple-equilibrium) coordination problems can be solved by using the concept of correlated equilibrium. Unlike Nash equilibrium, which only allows for individualistic and independent behaviour, a correlated equilibrium allows for the players’ behaviour to be coordinated and correlated.

Keywords: monetary and fiscal policies; differential games; correlated equilibrium. (search for similar items in EconPapers)
JEL-codes: C73 E58 F33 F42 (search for similar items in EconPapers)
Pages: 30
Date: 2004-06
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.dipecodir.it/wpsap/data/wp74.pdf (application/pdf)

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:sap:wpaper:wp74

Access Statistics for this paper

More papers in Working Papers in Public Economics from Department of Economics and Law, Sapienza University of Roma
Bibliographic data for series maintained by Luisa Giuriato ().