Dynamic Controllability With Overlapping Targets: Or Why Target Independence May Not Be Good For You
AbstractWe generalize some recent results developed in static policy games with multiple players, to a dynamic context. We find that the classical theory of economic policy, static or dynamic, can be usefully applied to a strategic context of difference games: if one player satisfies the Golden Rule, then either all other players policies are ineffective with respect to the dynamic target variables shared with that player. Or no Nash Feedback Equilibrium can exist, unless they all share target values for those variables. We extend those results to the case in which there are also nondynamic targets, to show that policy effectiveness (a Nash equilibrium) can continue to exist if some players satisfy the Golden Rule but target values differ between players in their nondynamic targets. We demonstrate the practical importance of these results by showing how policy effectiveness (a policy equilibrium) can appear or disappear with small variations in the expectations process or policy rule in a widely used model of monetary policy with the possibility of target independence.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by Cambridge University Press in its journal Macroeconomic Dynamics.
Volume (Year): 11 (2007)
Issue (Month): 02 (April)
Contact details of provider:
Postal: The Edinburgh Building, Shaftesbury Road, Cambridge CB2 2RU UK
Fax: +44 (0)1223 325150
Web page: http://journals.cambridge.org/jid_MDYProvider-Email:firstname.lastname@example.org
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Di Bartolomeo Giovanni & Hughes Hallett Andrew & Acocella Nicola, 2008.
"Policy games, policy neutrality and Tinbergen controllability under rational expectations,"
0034, Department of Communication, University of Teramo.
- Hallett, Andrew Hughes & Acocella, Nicola & Di Bartolomeo, Giovanni, 2010. "Policy games, policy neutrality and Tinbergen controllability under rational expectations," Journal of Macroeconomics, Elsevier, vol. 32(1), pages 55-67, March.
- Acocella Nicola & Di Bartolomeo Giovanni, 2010. "Conflict of interest and coordination in public good provision," Politica economica, Società editrice il Mulino, issue 3, pages 389-408.
- Acocella, Nicola & Di Bartolomeo, Giovanni, 2007.
"Towards a new theory of economic policy: Continuity and innovation,"
4419, University Library of Munich, Germany.
- Acocella Nicola & Di Bartolomeo Giovanni, 2007. "Towards a new theory of economic policy: Continuity and innovation," wp.comunite 0020, Department of Communication, University of Teramo.
- Huiping Yuan & Stephen M. Miller, 2011. "The Optimality and Controllability of Discretionary Monetary Policy," Working papers 2011-17, University of Connecticut, Department of Economics.
- Nicola acocella & Giovanni Di Bartolomeo & Andrew Hughes Hallett, . "The theory of economic policy: from a theory of control to a theory of conflict (resolutions)," Working Papers 91/11, Sapienza University of Rome, Metodi e modelli per l'economia, il territorio e la finanza MEMOTEF.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Keith Waters).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.