Policy rule Nash equilibria
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Economics paper on Nash equilibria of monetary policy rules.
It develops mathematical models of monetary policy equilibria, not research itself.
Monetary policy game-theory model of instrument rules; economics domain, not research systems.
Abstract
Abstract. We study how different types of instrument rules affect the outcome of a monetary policy game between the central bank and the private sector. Policy rules can be independent of output and a shock, functions of the shock, or functions of output. We rank the Nash equilibria generated by different types of policy rules according to the central bank's ex ante expected loss. If both players can condition on output, then the following is true: no equilibrium exists if the central bank cares much about output stability and little about price stability, and infinitely many equilibria exist otherwise. JEL classification: E52, E61 Equilibres à la Nash des règles de politique. L’auteur étudie comment le choix de divers types de règles instrumentales a un effet sur le résultat d’un jeu de politique monétaire entre la banque centrale et le secteur privé. Les règles de politique peuvent être indépendantes de la production ou d’un choc, être fonction d’un choc ou de la production. On établit un ordre des équilibres à la Nash engendrés par ces divers types de règles de politique selon la taille des pertes anticipées ex ante par la banque centrale. Si les deux joueurs fondent leur comportement sur la production, il s’ensuit que — aucun équilibre n’existe si la banque centrale est très préoccupée par la stabilité du niveau de production et peu préoccupée de la stabilité des prix, et autrement, une infinité d’équilibres existent.
Stored with the screening record, where it is evidence for the labels above.
The record
- Venue
- Canadian Journal of Economics/Revue canadienne d économique
- Topic
- Monetary Policy and Economic Impact
- Field
- Economics, Econometrics and Finance
- Canadian institutions
- —
- Funders
- —
- Keywords
- EconomicsPrice of stabilityMathematical economicsNash equilibriumHumanitiesShock (circulatory)Welfare economicsKeynesian economicsMonetary policyPhilosophy
- Has abstract in OpenAlex
- yes