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A framework for the analysis of self-confirming policies
P Battigalli1, S Cerreia-Vioglio1, F Maccheroni1
1Università Bocconi and IGIER, Milan, Italy.
Theory and Decision
|May 2, 2022
Summary
This study introduces a framework for analyzing self-confirming policies and equilibria under incomplete information. It characterizes stationary monetary policies within a linear-quadratic model, advancing economic policy analysis.
Area of Science:
- Economics
- Econometrics
- Game Theory
Background:
- Economic agents often operate with incomplete information about underlying stochastic models.
- Self-confirming equilibria offer a framework to analyze decision-making under such informational constraints.
- Understanding policy implications in these settings is crucial for economic stability.
Purpose of the Study:
- To develop a general analytical framework for self-confirming policies.
- To investigate self-confirming equilibria in dynamic decision problems with incomplete information.
- To characterize stationary monetary policies in a specific economic model.
Main Methods:
- Development of a general theoretical framework for policy analysis.
- Application to recurrent decision problems with incomplete information.
- Characterization of policies within a linear-quadratic economic model.
Main Results:
- A general framework for analyzing self-confirming policies is established.
- Stationary monetary policies are characterized in the linear-quadratic setting.
- The analysis provides insights into equilibria with incomplete information.
Conclusions:
- The framework facilitates the study of economic policies under incomplete information.
- Characterizing monetary policies in self-confirming equilibria advances understanding of economic dynamics.
- The findings are relevant for designing robust economic policies.
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