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Fiscal-Monetary Policy Coordination And Debt Management: A Two Stage Dynamic Analysis

  • Giovanni Di Bartolomeo


  • Debora Di Gioacchino


This paper studies the interaction between two autonomous policymakers, the central bank and the government, in managing public debt as the result of a two-stage game. In the first stage the institutional regime is established. This determines the equilibrium solution to be applied in the second stage, in which a differential game is played between the two policymakers. It is shown that, if the policymakers can communicate before the game is played, (multiple-equilibrium) coordination problems can be solved by using the concept of correlated equilibrium. Unlike Nash equilibrium, which only allows for individualistic and independent behaviour, a correlated equilibrium allows for

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Paper provided by EconWPA in its series Macroeconomics with number 0504024.

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Length: 30 pages
Date of creation: 16 Apr 2005
Date of revision:
Handle: RePEc:wpa:wuwpma:0504024
Note: Type of Document - pdf; pages: 30
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