Uniqueness of Markov-perfect equilibrium in infinite-time affine-quadratic differential gains

Article Abstract:

Sufficient conditions for uniqueness of a feedback Nash equilibrium or Markov-perfect equilibrium in a class of dynamic games are described. A feedback Nash equilibrium is present when action variables are allowed to depend on past history through the current value of the state variable only, and is the appropriate solution when agents cannot precommit to future actions. One condition is that the interaction terms in either player's instantaneous playoff must be small. The other condition is that the coefficient on the square of i's opponent action variable in i's instantaneous payoff be bounded above.

Research, Analysis, Differential games, Game theory, Markov processes

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Interpreting a stochastic monetary growth model as a modified social planner's problem

Article Abstract:

A demonstration is provided of the use of a stochastic growth model similar to the cash-in-advance model examined by Cooley and Hansen in 1989. This stochastic model, which can be interpreted as a modified social planner's problem, provides a good way to examine the monetary economy's state of equilibrium. This examination of competitive equilibrium can be done by using dynamic optimization methods to solve the modified social planner's problem. Another way to accomplish this would be to use the second welfare theorem to solve the same modified social planner's problem.

Monetary policy, Social planning

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A generalized variance bounds test with an application to the Holt et al. inventory model

Article Abstract:

West's variance bounds test is generalized and reinterpreted for a broad class of linear rational expectations equilibrium models. If observed data is in accordance with the model, a nonnegative weighted sum of autocovariances of the covariance-stationary components of the endogenous state variables would be attained. The new test is further applied to including unobservable exogenous state variables, nonstationary exogenous and endogenous state variables, and nonzero initial values for the endogenous state variables.

Inventories

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