Dynamic Controllability With Overlapping Targets: Or Why Target Independence May Not Be Good For You
We 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.
Volume (Year): 11 (2007)
Issue (Month): 02 (April)
|Contact details of provider:|| Postal: |
Web page: http://journals.cambridge.org/jid_MDY
When requesting a correction, please mention this item's handle: RePEc:cup:macdyn:v:11:y:2007:i:02:p:202-213_06. See general information about how to correct material in RePEc.
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.