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Monetary Consequences of Fiscal Stress in a Game Theoretic Framework

Author

Listed:
  • Dat Thanh Nguyen

    (Banking Department, University of Economics - The University of Danang, Vietnam)

  • Viet Anh Hoang

    (Banking Department, University of Economics - The University of Danang, Vietnam)

Abstract

This paper maps Leeper and Walker (2011) model into a game theory framework to study about the strategic aspects of monetary and fiscal interaction under a fiscal stress caused by an ageing population problem. The paper reveals that the outcomes of the game depend on the parameters of the underlying model, the size of the projected transfers and the public inflation expectation. The findings show that commitment to the target (inflation, government transfers) plays a crucial role in the policy interaction.

Suggested Citation

  • Dat Thanh Nguyen & Viet Anh Hoang, 2020. "Monetary Consequences of Fiscal Stress in a Game Theoretic Framework," Journal of Central Banking Theory and Practice, Central bank of Montenegro, vol. 9(special i), pages 125-164.
    • Handle: RePEc:cbk:journl:v:9:y:2020:i:si:p:125-164
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    References listed on IDEAS

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    More about this item

    Keywords

    Monetary-fiscal interaction; Game theory; Ageing population; Dynamic leadership; Stochastic timing;
    All these keywords.

    JEL classification:

    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General

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