A Game Theoretical Approach to Monetary Policy

What Strategy for the ECB
  • André Fourçans
  • Thierry Warin


Game theory has been used as a tool to analyze monetary policy since the beginning of the 1980s, especially to study the “rules versus discretion” question. After the founding article by Kydland and Prescott (1977), Barro and Gordon (1983) introduced game theory in their model. This approach was improved by Canzoneri (1985), Backus and Driffill (1985) and Rogoff (1985). The debate “rules versus discretion” turned into the debate “credibility versus flexibility” (Minford 1993). New concepts appeared, such as the conservative central banker and performance contracts. These models, built in a closed economy, led to the famous time inconsistency result with its inflationary bias. The question is whether this result also holds in an open economy.


Exchange Rate Monetary Policy Central Bank European Central Bank Repeated Game 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.


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Copyright information

© Springer Science+Business Media New York 2001

Authors and Affiliations

  • André Fourçans
    • 1
  • Thierry Warin
    • 1
  1. 1.Graduate School of Economics and ManagementESSECFrance

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