Strategic interaction between government and central bank in framework of cooperative and non-cooperative games

D. Mahmoudinia, Jacob Engwerda, Rahim Dallali Esfahani, R.B. Dastjerdi, M. Fakhar

Research output: Contribution to journalArticleScientificpeer-review

Abstract

In this paper we analyzed the strategic interaction between government and central bank in Iranian economy. Using dynamic differential games and Nash equilibrium within cooperative and non-cooperative setting, we try to find the optimal values of debt, deficit and monetary base. The results of simulation show that in cooperative case the level of equilibrium debt is lower than the non-cooperative case and converge speed is higher in cooperative setting than non-cooperation setting. Also in cooperative case than non-cooperative case, less creation of money and less government deficit are needed for debt stabilization in long run. The results also show that in both cooperative and non-cooperative cases under uncertainty, more active policies are used to track debt to its equilibrium level. These active policies lead debt goes to smaller level.
Original languageOther
Pages (from-to)83-121
JournalJournal of Economic Modeling Research
Volume6
Issue number24
Publication statusPublished - 19 Sep 2016

Keywords

  • Differential Game
  • Cooperative and Non-cooperative Game
  • Nash Equilibrium
  • Monetary Policy
  • Fiscal Policy

Cite this

Mahmoudinia, D., Engwerda, J., Esfahani, R. D., Dastjerdi, R. B., & Fakhar, M. (2016). Strategic interaction between government and central bank in framework of cooperative and non-cooperative games. Journal of Economic Modeling Research, 6(24), 83-121.
Mahmoudinia, D. ; Engwerda, Jacob ; Esfahani, Rahim Dallali ; Dastjerdi, R.B. ; Fakhar, M. / Strategic interaction between government and central bank in framework of cooperative and non-cooperative games. In: Journal of Economic Modeling Research. 2016 ; Vol. 6, No. 24. pp. 83-121.
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Mahmoudinia, D, Engwerda, J, Esfahani, RD, Dastjerdi, RB & Fakhar, M 2016, 'Strategic interaction between government and central bank in framework of cooperative and non-cooperative games' Journal of Economic Modeling Research, vol. 6, no. 24, pp. 83-121.

Strategic interaction between government and central bank in framework of cooperative and non-cooperative games. / Mahmoudinia, D.; Engwerda, Jacob; Esfahani, Rahim Dallali; Dastjerdi, R.B.; Fakhar, M.

In: Journal of Economic Modeling Research, Vol. 6, No. 24, 19.09.2016, p. 83-121.

Research output: Contribution to journalArticleScientificpeer-review

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AU - Mahmoudinia, D.

AU - Engwerda, Jacob

AU - Esfahani, Rahim Dallali

AU - Dastjerdi, R.B.

AU - Fakhar, M.

PY - 2016/9/19

Y1 - 2016/9/19

N2 - In this paper we analyzed the strategic interaction between government and central bank in Iranian economy. Using dynamic differential games and Nash equilibrium within cooperative and non-cooperative setting, we try to find the optimal values of debt, deficit and monetary base. The results of simulation show that in cooperative case the level of equilibrium debt is lower than the non-cooperative case and converge speed is higher in cooperative setting than non-cooperation setting. Also in cooperative case than non-cooperative case, less creation of money and less government deficit are needed for debt stabilization in long run. The results also show that in both cooperative and non-cooperative cases under uncertainty, more active policies are used to track debt to its equilibrium level. These active policies lead debt goes to smaller level.

AB - In this paper we analyzed the strategic interaction between government and central bank in Iranian economy. Using dynamic differential games and Nash equilibrium within cooperative and non-cooperative setting, we try to find the optimal values of debt, deficit and monetary base. The results of simulation show that in cooperative case the level of equilibrium debt is lower than the non-cooperative case and converge speed is higher in cooperative setting than non-cooperation setting. Also in cooperative case than non-cooperative case, less creation of money and less government deficit are needed for debt stabilization in long run. The results also show that in both cooperative and non-cooperative cases under uncertainty, more active policies are used to track debt to its equilibrium level. These active policies lead debt goes to smaller level.

KW - Differential Game

KW - Cooperative and Non-cooperative Game

KW - Nash Equilibrium

KW - Monetary Policy

KW - Fiscal Policy

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EP - 121

JO - Journal of Economic Modeling Research

JF - Journal of Economic Modeling Research

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