Sensitivity analysis for a dynamic macroeconomic policy game in a monetary union

Area of Science:

• Economics
• Game Theory
• Monetary Policy

Background:

• An earlier study presented a dynamic game model of a monetary union involving governments and a central bank.
• The model's parameters were previously determined through calibration, not econometric estimation.

Purpose of the Study:

• To assess the sensitivity of the original model's results to alternative parameter values.
• To determine if the model's conclusions are robust across a range of plausible parameter settings.

Main Methods:

• The study re-analyzed the dynamic game model of a monetary union.
• Alternative parameter values, differing from the original calibration, were examined.
• Results were compared to identify deviations and their economic implications.

Main Results:

• The core findings of the original model remained qualitatively consistent with alternative parameter values.
• Minor deviations were observed in specific cases, prompting further economic interpretation.
• The macroeconomic effects of policy changes under altered parameters were illustrated.

Conclusions:

• The dynamic game model of a monetary union demonstrates qualitative robustness to parameter variations.
• Deviations from original results provide valuable economic insights into policy and macroeconomic outcomes.