{"title":"DSGE Nash: Solving Nash games in macro models","authors":"Massimo Ferrari Minesso , Maria Sole Pagliari","doi":"10.1016/j.jedc.2025.105143","DOIUrl":null,"url":null,"abstract":"<div><div>This paper presents <span>DSGE Nash</span>, a toolkit to solve for pure strategy Nash equilibria of global games in macro models. Nash equilibria are computed with a decentralized approach: each player controls only its own policy function while other agents in the economy act independently. Although primarily designed to solve for Nash equilibria in DSGE models, the toolkit encompasses a broad range of settings, including the possibility of matching empirical data. Importantly, it allows to solve for the equilibrium in the presence of non-linearities or conditionally on shocks. When only one player is selected, the problem is re-framed as a standard optimal policy problem. We apply the algorithm to a standard two-country open-economy model, where central banks compete for rate setting. In the Nash equilibrium, central banks symmetrically trade-off inflation for output stabilization, in the presence of a zero lower bound constraint, the equilibrium becomes asymmetric: the central bank in the shock-originating economy implements a tighter policy, to reduce the zero lower bound duration, while the central bank in the other country opts for a more lenient rate setting strategy.</div></div>","PeriodicalId":48314,"journal":{"name":"Journal of Economic Dynamics & Control","volume":"178 ","pages":"Article 105143"},"PeriodicalIF":1.9000,"publicationDate":"2025-07-14","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Journal of Economic Dynamics & Control","FirstCategoryId":"96","ListUrlMain":"https://www.sciencedirect.com/science/article/pii/S0165188925001095","RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q2","JCRName":"ECONOMICS","Score":null,"Total":0}
引用次数: 0
Abstract
This paper presents DSGE Nash, a toolkit to solve for pure strategy Nash equilibria of global games in macro models. Nash equilibria are computed with a decentralized approach: each player controls only its own policy function while other agents in the economy act independently. Although primarily designed to solve for Nash equilibria in DSGE models, the toolkit encompasses a broad range of settings, including the possibility of matching empirical data. Importantly, it allows to solve for the equilibrium in the presence of non-linearities or conditionally on shocks. When only one player is selected, the problem is re-framed as a standard optimal policy problem. We apply the algorithm to a standard two-country open-economy model, where central banks compete for rate setting. In the Nash equilibrium, central banks symmetrically trade-off inflation for output stabilization, in the presence of a zero lower bound constraint, the equilibrium becomes asymmetric: the central bank in the shock-originating economy implements a tighter policy, to reduce the zero lower bound duration, while the central bank in the other country opts for a more lenient rate setting strategy.
期刊介绍:
The journal provides an outlet for publication of research concerning all theoretical and empirical aspects of economic dynamics and control as well as the development and use of computational methods in economics and finance. Contributions regarding computational methods may include, but are not restricted to, artificial intelligence, databases, decision support systems, genetic algorithms, modelling languages, neural networks, numerical algorithms for optimization, control and equilibria, parallel computing and qualitative reasoning.