Strategic interactions between an independent central bank and a myopic government with government debt / prepared by Sven Jari Stehn and David Vines.
We analyse optimal discretionary games between a benevolent central bank and a myopic government in a New Keynesian model. First, when lump-sum taxes are available and public debt is absent, we show that a Nash game results in too much government spending and excessively high interest rates, while f...
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