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Policy games, policy neutrality and Tinbergen controllability under rational expectations

  • Di Bartolomeo Giovanni
  • Hughes Hallett Andrew
  • Acocella Nicola

This paper shows the relationship between static controllability (the well-known Tinbergen golden rule), and the existence and other properties of the Nash equilibrium in a dynamic setting with rational expectations for future behavior. We show how to determine the existence of equilibrium outcomes; the conditions under which no equilibrium exists; and who will get to dominate (or who will find their policies to have become ineffective) in those equilibria, without having to compute and enumerate all the possible equilibria directly.

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File URL: http://wp.comunite.it/data/wp_no_34_2008.pdf
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Paper provided by Department of Communication, University of Teramo in its series wp.comunite with number 0034.

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Date of creation: Jan 2008
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Handle: RePEc:ter:wpaper:0034
Contact details of provider: Web page: http://wp.comunite.it/

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  1. N. Acocella & G. Bartolomeo & Andrew Hallett, 2006. "Controllability in Policy Games: Policy Neutrality and the Theory of Economic Policy Revisited," Computational Economics, Society for Computational Economics, vol. 28(2), pages 91-112, September.
  2. Pierpaolo Benigno & Michael Woodford, 2004. "Optimal monetary and fiscal policy: a linear-quadratic approach," International Finance Discussion Papers 806, Board of Governors of the Federal Reserve System (U.S.).
  3. Athey, S., 1997. "Sigle Crossing Properties and the Existence of Pure Strategy Equilibria in Games of Incomplete Information," Working papers 97-11, Massachusetts Institute of Technology (MIT), Department of Economics.
  4. Gnocchi, Stefano, 2006. "Optimal simple monetary policy rules and non-atomistic wage setters in a New-Keynesian framework," Working Paper Series 0690, European Central Bank.
  5. Olivier Blanchard & Jordi Galí, 2005. "Real wage rigidities and the new Keynesian model," Economics Working Papers 912, Department of Economics and Business, Universitat Pompeu Fabra, revised Oct 2005.
  6. Evi Pappa, 2004. "Do the ECB and the Fed really need to cooperate? Optimal monetary policy in a two-country world," LSE Research Online Documents on Economics 512, London School of Economics and Political Science, LSE Library.
  7. Acocella, Nicola & Di Bartolomeo, Giovanni & Hallett, Andrew Hughes, 2007. "Dynamic Controllability With Overlapping Targets: Or Why Target Independence May Not Be Good For You," Macroeconomic Dynamics, Cambridge University Press, vol. 11(02), pages 202-213, April.
  8. Söderström, Ulf, 2000. "Monetary policy with uncertain parameters," Working Paper Series 0013, European Central Bank.
  9. repec:cup:cbooks:9780521264440 is not listed on IDEAS
  10. Kai Leitemo & Ulf Söderström, 2005. "Robust monetary policy in the New-Keynesian framework," Macroeconomics 0508032, EconWPA.
  11. Fisher, P. G. & Hallett, A. J. Hughes, 1988. "Efficient solution techniques for linear and non-linear rational expectations models," Journal of Economic Dynamics and Control, Elsevier, vol. 12(4), pages 635-657, November.
  12. Evans, George W. & Honkapohja, Seppo, 2002. "Monetary Policy, Expectations and Commitment," CEPR Discussion Papers 3434, C.E.P.R. Discussion Papers.
  13. Olivier Blanchard & Jordi Gali, 2006. "A new Keynesian model with unemployment," Working Paper Research 92, National Bank of Belgium.
  14. Blanchard, Olivier Jean & Kahn, Charles M, 1980. "The Solution of Linear Difference Models under Rational Expectations," Econometrica, Econometric Society, vol. 48(5), pages 1305-11, July.
  15. Nicola Acocella & Giovanni Di Bartolomeo, 2005. "Tinbergen And Theil Meet Nash: Controllability In Policy Games," Macroeconomics 0504036, EconWPA, revised 06 Sep 2005.
  16. George W. Evans & Seppo Honkapohja, 2003. "Expectations and the Stability Problem for Optimal Monetary Policies," Review of Economic Studies, Wiley Blackwell, vol. 70(4), pages 807-824, October.
  17. Brock,W.A. & Durlauf,S.N., 2004. "Local robustness analysis : theory and application," Working papers 22, Wisconsin Madison - Social Systems.
  18. 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.
  19. Glenn D. Rudebusch & John C. Williams, 2008. "Revealing the Secrets of the Temple: The Value of Publishing Central Bank Interest Rate Projections," NBER Chapters, in: Asset Prices and Monetary Policy, pages 247-289 National Bureau of Economic Research, Inc.
  20. Hughes Hallett, Andrew J, 1989. "Econometrics and the Theory of Economic Policy: The Tinbergen-Theil Contributions 40 Years On," Oxford Economic Papers, Oxford University Press, vol. 41(1), pages 189-214, January.
  21. Robert J. Barro & David B. Gordon, 1983. "Rules, Discretion and Reputation in a Model of Monetary Policy," NBER Working Papers 1079, National Bureau of Economic Research, Inc.
  22. Acocella, Nicola & Di Bartolomeo, Giovanni & Hughes Hallett, Andrew, 2008. "When Can Central Banks Anchor Expectations? Policy communication and controllability," CEPR Discussion Papers 7078, C.E.P.R. Discussion Papers.
  23. Gylfason, Thorvaldur & Lindbeck, Assar, 1991. "The Interaction of Monetary Policy and Wages," CEPR Discussion Papers 551, C.E.P.R. Discussion Papers.
  24. 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.
  25. Lucas, Robert Jr, 1976. "Econometric policy evaluation: A critique," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 1(1), pages 19-46, January.
  26. Alesina, Alberto & Tabellini, Guido, 1987. "Rules and Discretion with Noncoordinated Monetary and Fiscal Policies," Economic Inquiry, Western Economic Association International, vol. 25(4), pages 619-30, October.
  27. Sven Jari Stehn & David Vines, 2008. "Strategic Interactions Between An Independent Central Bank and a Myopic Government with Government Debt," IMF Working Papers 08/164, International Monetary Fund.
  28. 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.
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