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Non-neutrality of economic policy: An application of the Tinbergen-Theil's approach to a strategic context

Nicola Acocella and Giovanni Di Bartolomeo ()

No 82, Working Papers from University of Rome La Sapienza, Department of Public Economics

Abstract: Issues of policy effectiveness and neutrality are widespread in the economic literature. They have been increasingly raised in specific contexts within the class of LQ (linear-quadratic) policy games in the last 20 years, notably with reference to monetary policy. The more general conditions ensuring nonneutrality in a strategic environment remain however to be inquired. We fill this gap by applying the classical theory of economic policy to a strategic context. This is also useful to highlight some existence conditions for policy game solutions. We restrict ourselves to the common LQ-games in a static perfect information framework, but our simple logic can be extended to other more general situations.

Keywords: LQ-policy games; policy ineffectiveness; controllability. (search for similar items in EconPapers)
JEL-codes: C72 E52 E61 (search for similar items in EconPapers)
Pages: 62
Date: 2005-07
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