S.L.I.M., a small linear interdependent model of eight EU-member states, the USA and Japan

International Economics;EU

Convergence and international policy coordination in the EU: A dynamic games approach

Maastricht Treaty;Dynamic Games;EU;Game Theory;International Policy

Strategic Interactions between Fiscal and Monetary Authorities in a Multi-Country New-Keynesian Model of a Monetary Union

In this paper we consider a number of key issues related to the policy coordination in a monetary union that has been recently discussed in the literature. To this end we propose a multi-country New-Keynesian model of a monetary union cast in the framework of linear quadratic differential games. Our framework can be used to simulate strategic interactions between an arbitrary number of fiscal authorities interacting in coalitions with or against the common central bank. For many parameter combinations our results confirm the findings of Beetsma et al. (2001) that for symmetric inflation and output gap shocks, fiscal coordination between all the countries is counter-productive within a monetary union. The clash between the central bank and the coalition of national governments is most intense under a symmetric inflation shocks when there is strong conflict concerning the orientation of stabilisation policies. This conflict is less pronounced under an asymmetric inflation and output gap shocks, however, still makes fiscal cooperation unattractive. We extend the existing New-Keynesian literature on policy coordination by considering not only cases of non-coordination, fiscal cooperation and the grand coalition, but also the partial cooperation arrangements between fiscal players. We show that, in many cases, partial fiscal coordination of a subgroup of fiscal players is more efficient, from the social point of view, than non-coordination. However, this regime still delivers poor results from the perspective of individual players. This occurs especially in the case of asymmetric shocks, as the countries directly affected by the shocks tend to "export" losses to the countries with whom they form a coalition. Furthermore, we show that the common objective of the grand coalition is of the upmost importance for the outcome of the stabilisation process.macroeconomic stabilisation, EMU, policy coordination, linear quadratic differential games

The (in)finite horizon open-loop Nash LQ Game: An application to EMU

game theory;Nash equilibrium;EMS

Innovation Strategies in a Competitive Dynamic Setting

This paper presents a dynamic model of a competitive R&D and production duopoly subject to knowledge spillovers. Two asymmetric firms operate for a limited period of time and dispose their knowledge capital in the end. Both firms and the social planner prefer the R&D-cooperative strategy over the competitive one regardless of the intensity of knowledge spillovers. Accumulation of knowledge capital results allows the monopolist to have lower marginal cost of production and charge a lower market price than a fully competitive duopoly. Being able to define the degree of knowledge exchange when creating a research joint venture, the firms do not necessary choose the highest degree of cooperation available.innovation, R&D, spillovers, cooperation

Measuring Knowledge Spillovers Using Belgian EPO and USPTO Patent Data

This paper investigates two major issues of the patenting behavior of Belgian firms. Firstly, it studies the probabilistic distribution of the patent citations among several major sectors. Secondly, the firm-oriented data is studied to investigate the relationships between the Belgian firms’ size and their patent citation behavior. The modeling results conclude that there is evidence that the smaller firms tend to be more active in patent citation than larger ones. Analyzing the implications from the probabilistic models of citations the paper concludes, that there are different patterns of citation behavior in different sectors. Some sectors exhibit more openness toward inter-firm or inter-industry spillovers, while others do not. Moreover, different industrial sectors exhibit different relationships between the probability of a citation to occur in this sector and the relative time lag between the citing and cited patents.