Strategic Interaction Between Government and Central Bank in Framework of Cooperative and Non-Cooperative Games

mahmoudinia, davoud; engwerda, jacob; dallali esfahani, rahim; bakhshi dastjerdi, rasul; fakhar, majid

doi:10.18869/acadpub.jemr.6.24.83

Volume 7, Issue 24 (6-2016) jemr 2016, 7(24): 83-121 | Back to browse issues page

‎ 10.18869/acadpub.jemr.6.24.83

‎ 20.1001.1.22286454.1395.6.24.4.3

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mahmoudinia D, engwerda J, dallali esfahani R, bakhshi dastjerdi R, fakhar M. Strategic Interaction Between Government and Central Bank in Framework of Cooperative and Non-Cooperative Games. jemr 2016; 7 (24) :83-121
URL: http://jemr.khu.ac.ir/article-1-1270-en.html

Strategic Interaction Between Government and Central Bank in Framework of Cooperative and Non-Cooperative Games

Davoud Mahmoudinia ^*

¹, Jacob Engwerda²

, Rahim Dallali esfahani³

, Rasul Bakhshi dastjerdi³

, Majid Fakhar³

1- Isfahan university , davoud.mahmoudinia@gmail.com
2- tilburg university
3- Isfahan university

Abstract: (7421 Views)

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.

Keywords: Differential Game, Cooperative and Non-cooperative Game, Nash Equilibrium, Monetary Policy, Fiscal Policy

Full-Text [PDF 2626 kb] (3589 Downloads)

Type of Study: توسعه ای | Subject: پولی و مالی
Received: 2015/07/6 | Accepted: 2016/06/28 | Published: 2016/09/19

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