Debt Stabilisation and Dynamic Interaction Between Monetary Authority and National Fiscal Authorities

Result code in IS VaVaI

<a href="https://www.isvavai.cz/riv?ss=detail&h=RIV%2F61989100%3A27510%2F25%3A10254742" target="_blank" >RIV/61989100:27510/25:10254742 - isvavai.cz</a>

Result on the web

<a href="https://link.springer.com/article/10.1007/s10614-024-10561-0" target="_blank" >https://link.springer.com/article/10.1007/s10614-024-10561-0</a>

DOI - Digital Object Identifier

<a href="http://dx.doi.org/10.1007/s10614-024-10561-0" target="_blank" >10.1007/s10614-024-10561-0</a>

Result language

angličtina

Original language name

Debt Stabilisation and Dynamic Interaction Between Monetary Authority and National Fiscal Authorities

Original language description

The main aim of the present research is to consider a monetary union&apos;s economy consisting of N countries, N fiscal authorities (one for each country) and a single monetary authority. The fiscal authorities want to stabilise output and public debt through the primary government balance, and they can exhibit heterogeneous preferences about the trade-off between output and debt stability. Unlike these, the monetary authority has the aim of price and output stability. They play a non-cooperative policy game, in which they independently and simultaneously choose monetary and fiscal instruments to pursue their goals. In a dynamic setting, each authority must choose its policy instrument prevailing in the next period without knowing-at the end of each period-the choice of other authorities. By assuming static expectations, the present work shows the possibility of several dynamic outcomes. First, there exists one Nash equilibrium representing the optimal level for the macro economy; this equilibrium is stable if the average weight that fiscal authorities assign to output stability is not excessively high; therefore, this result holds even if some authorities are less willing to promote debt stabilisation. Second, in addition to this equilibrium, there exist other Nash equilibria representing steady-state values for macroeconomic variables that differ from the targets adopted by the authorities; these equilibria emerge and are stable if the authorities&apos; preference for output stability is even greater and with a higher degree of heterogeneity compared to the previous case. Third, the parameters of the model matter to determine the stability properties of the equilibria, and the analysis shows the possibility of nonlinear dynamics.

Czech name

—

Czech description

—

Type

J_imp - Article in a specialist periodical, which is included in the Web of Science database

CEP classification

—

OECD FORD branch

50202 - Applied Economics, Econometrics

Project

<a href="/en/project/GA23-06282S" target="_blank" >GA23-06282S: Evolutionary economic dynamics with finite populations: Modeling and applications</a><br>

Continuities

P - Projekt vyzkumu a vyvoje financovany z verejnych zdroju (s odkazem do CEP)

Publication year

2025

Confidentiality

S - Úplné a pravdivé údaje o projektu nepodléhají ochraně podle zvláštních právních předpisů

Name of the periodical

Computational Economics

ISSN

0927-7099

e-ISSN

1572-9974

Volume of the periodical

65

Issue of the periodical within the volume

February

Country of publishing house

NL - THE KINGDOM OF THE NETHERLANDS

Number of pages

23

Pages from-to

913-935

UT code for WoS article

001184400700001

EID of the result in the Scopus database

2-s2.0-85187943360