It has been recognized that the optimal strategy of a government is generally time-inconsistent: optimality requires that the government take into account expectations effects in the formulation of its policy and to ignore these effects when applying the policy. In order to analyse the problem,...

In many countries two decision-making institutions, the government and the central bank, manage fiscal and monetary policy separately. Such decentralization can lead to a change in the optimal inflation-output trade-off. In fact lack of cooperation can result in a change in the position of the...

We consider a differential game in which the joint choices of the two players influences the variance, but not the mean, of the one-dimensional state variable. We interpret this state variable as a summary of how far ‘ahead’ player 1 is in the game. At each moment in time, players receive a...

We analyse an economy that lacks a strong legal-political institutional infrastructure and is populated by multiple powerful groups. Powerful groups dynamically interact via a fiscal process that effectively allows open access to the aggregate capital stock. In equilibrium, this leads to slow...

A two-country dynamic general-equilibrium model with imperfect competition and price stickiness is considered. This work shows the conditions under which price stability can implement the flexible-price allocation as a Nash equilibrium. This is possible if and only if both countries maintain a...

The paper investigates the sustainability of cooperative rules for the conduct of macroeconomic policy in a two-country world. The problem is set out as a supergame in which the threat strategy is to switch to a Nash non-cooperative equilibrium. A number of possible non-cooperative equilibria...

We analyse welfare-maximizing monetary policy in a dynamic general equilibrium two-country model with price stickiness and imperfect competition. In this context, a typical terms of trade externality affects policy interaction between independent monetary authorities. Unlike the existing...

We find the Nash equilibria for monotone n-player symmetric games where each player chooses whether to participate. Examples include market entry games, coordination games, and the bar-room game depicted in the movie 'A Beautiful Mind'. The symmetric Nash equilibrium involves excessive...

We examine regulation as a repeated game between a regulator and a utility facing a Markovian sequence of demands. Sunk capital would be expropriated by a regulator concerned only with the short-run interests of consumers. There exist rate of return regulatory policies supporting efficient...

This Paper tackles the issue of international fiscal coordination in a world where markets are integrated but national governments are sovereign. The consequences of capital market liberalization to national fiscal policies and possible remedies to resulting inefficiencies are analysed. A...