Abstract
This paper applies the framework of dynamic game theory to the analysis of a number of issues in international policy making. First, a dynamic inflationary model is developed for two interdependent symmetric economies, where the objective of each policy maker is to trade off in an intertemporally optimal way the rate of inflation and unemployment in his economy. Then, the equilibrium is studied under a variety of behavioral assumptions. These include principally feedback Nash equilibrium, feedback Stackelberg behavior, and feedback consistent conjectural variations equilibrium, all under the feedback information pattern and with discounted objective functions defined on an infinite time horizon. These solutions are subsequently computed for different sets of numerical values assigned to some key parameters in the model, and compared with results obtained in a previous work using a static model.
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© 1986 Springer-Verlag Berlin Heidelberg
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Başar, T., Turnovsky, S.J., D’Orey, V. (1986). Optimal Strategic Monetary Policies in Dynamic Interdependent Economies. In: Başar, T. (eds) Dynamic Games and Applications in Economics. Lecture Notes in Economics and Mathematical Systems, vol 265. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-61636-5_7
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DOI: https://doi.org/10.1007/978-3-642-61636-5_7
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