Journal of Economics

, Volume 62, Issue 2, pp 111–140 | Cite as

Monetary and fiscal policy interaction and government debt stabilization

  • Bas van Aarle
  • Lans Bovenberg
  • Matthias Raith


Employing differential games, this paper models the strategic interaction between monetary authorities who control monetization and fiscal authorities who control primary fiscal deficits. We analytically compute and interpret the cooperative and noncooperative Nash open-loop equilibria. Furthermore, we reinterpret unpleasant monetarist arithmetic and analyze the impact of a more conservative central bank. Finally, to explore the consequences of a more independent central bank, we analyze Stackelberg open-loop equilibria.


Economic Theory International Economic Central Bank Fiscal Policy Differential Game 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.


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Copyright information

© Springer-Verlag 1995

Authors and Affiliations

  • Bas van Aarle
    • 1
  • Lans Bovenberg
    • 1
  • Matthias Raith
    • 2
  1. 1.Center for Economic Research (B536)Tilburg UniversityTilburgThe Netherlands
  2. 2.Department of EconomicsUniversity of BielefeldBielefeldGermany

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