Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/179170
Authors: 
Blueschke, Dmitri
Neck, Reinhard
Year of Publication: 
2018
Citation: 
[Journal:] Games [ISSN:] 2073-4336 [Volume:] 9 [Year:] 2018 [Issue:] 1 [Pages:] 1-15
Abstract: 
In this paper, we present an application of the dynamic tracking games framework to a monetary union. We use a small stylized nonlinear three-country macroeconomic model of a monetary union to analyze the interactions between fiscal (governments) and monetary (common central bank) policy makers, assuming different objective functions of these decision makers. Using the OPTGAME algorithm, we calculate solutions for several games: a noncooperative solution where each government and the central bank play against each other (a feedback Nash equilibrium solution), a fully-cooperative solution with all players following a joint course of action (a Pareto optimal solution) and three solutions where various coalitions (subsets of the players) play against coalitions of the other players in a noncooperative way. It turns out that the fully-cooperative solution yields the best results, the noncooperative solution fares worst and the coalition games lie in between, with a broad coalition of the fiscally more responsible countries and the central bank against the less thrifty countries coming closest to the Pareto optimum.
Subjects: 
dynamic game
feedback Nash equilibrium
Pareto solution
monetary union
macroeconomics
public debt
coalitions
Persistent Identifier of the first edition: 
Creative Commons License: 
https://creativecommons.org/licenses/by/4.0/
Document Type: 
Article
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