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


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
Issue number24
Publication statusPublished - 19 Sept 2016


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

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