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Controllability and non-neutrality of economic policy: The Tinbergen’s approach in a strategic context

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Author Info

  • Nicola Acocella

    (University of Rome I)

  • Giovanni Di Bartolomeo

    (University of Rome I)

Abstract

In the last 20 years issues of policy effectiveness and neutrality (notably with reference to monetary policy) have been increasingly raised in the context of static LQ (linear-quadratic) policy games. The general conditions ensuring policy non-neutrality in a strategic environment remains however to be inquired. We state these conditions by generalizing the classical theory of economic policy developed by Tinbergen and others to such a context. We also state necessary and sufficient conditions for the existence of Nash and Stackelberg equilibria. We finally show that the conditions for monetary policy effectiveness asserted in the literature respect our general conditions.

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Bibliographic Info

Paper provided by EconWPA in its series Macroeconomics with number 0504034.

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Length: 21 pages
Date of creation: 26 Apr 2005
Date of revision:
Handle: RePEc:wpa:wuwpma:0504034

Note: Type of Document - pdf; pages: 21
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Web page: http://128.118.178.162

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Keywords: LQ-policy games; policy ineffectiveness; static controllability;

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References

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  1. Guzzo, Vincenzo & Velasco, Andres, 1999. "The case for a populist Central Banker," European Economic Review, Elsevier, vol. 43(7), pages 1317-1344, June.
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  5. Dixit, Avinash & Lambertini, Luisa, 2003. "Symbiosis of monetary and fiscal policies in a monetary union," Journal of International Economics, Elsevier, vol. 60(2), pages 235-247, August.
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  8. Blanchard, Olivier Jean & Kiyotaki, Nobuhiro, 1987. "Monopolistic Competition and the Effects of Aggregate Demand," American Economic Review, American Economic Association, vol. 77(4), pages 647-66, September.
  9. Cukierman, Alex & Lippi, Francesco, 1999. "Labour Markets and Monetary Union: A Strategic Analysis," CEPR Discussion Papers 2236, C.E.P.R. Discussion Papers.
  10. Coricelli, Fabrizio & Cukierman, Alex & Dalmazzo, Alberto, 2001. "Economic Performance and Stabilization Policy in a Monetary Union with Imperfect Labour and Goods Markets," CEPR Discussion Papers 2745, C.E.P.R. Discussion Papers.
  11. Jerger, Jurgen, 2002. "Socially optimal monetary policy institutions," European Journal of Political Economy, Elsevier, vol. 18(4), pages 761-781, November.
  12. Fabrizio Coricelli & Alex Cukierman & Alberto Dalmazzo, 2006. "Monetary Institutions, Monopolistic Competition, Unionized Labor Markets and Economic Performance," Scandinavian Journal of Economics, Wiley Blackwell, vol. 108(1), pages 39-63, 03.
  13. Lawler, Phillip, 2001. "Monetary Policy, Central Bank Objectives, and Social Welfare with Strategic Wage Setting," Oxford Economic Papers, Oxford University Press, vol. 53(1), pages 94-113, January.
  14. Acocella, Nicola & Ciccarone, Giuseppe, 1997. " Trade Unions, Nonneutrality and Stagflation," Public Choice, Springer, vol. 91(2), pages 161-78, April.
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  16. Dasgupta, Partha & Maskin, Eric, 1986. "The Existence of Equilibrium in Discontinuous Economic Games, I: Theory," Review of Economic Studies, Wiley Blackwell, vol. 53(1), pages 1-26, January.
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Citations

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Cited by:
  1. Nicola Acocella & Giovanni Di Bartolomeo, 2005. "Tinbergen And Theil Meet Nash: Controllability In Policy Games," Macroeconomics 0504036, EconWPA, revised 06 Sep 2005.
  2. Acocella, Nicola & Di Bartolomeo, Giovanni, 2007. "Towards a new theory of economic policy: Continuity and innovation," MPRA Paper 4419, University Library of Munich, Germany.

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