2006 Fiscal Year Final Research Report Summary

A Game Theoretic Approach to Monetary Policy

Research Project

Project/Area Number	16530114
Research Category	Grant-in-Aid for Scientific Research (C)
Allocation Type	Single-year Grants
Section	一般
Research Field	Economic theory
Research Institution	Yokohama National University
Principal Investigator	UI Takashi Yokohama National University, Faculty of Economics, Professor, 経済学部, 教授 (60312815)
Project Period (FY)	2004 – 2006
Keywords	monetary policy / informational asymmetry / Knightian uncertainty / Choquet integral / rational expectations
Research Abstract	In this research, we study informational issues in monetary policy from game theoretic viewpoints, especially focusing on informational asymmetry and Knightian uncertainty. Concerning informational asymmetry, one of our contributions is to generalize the Lucas island model. Lucas showed that only unanticipated monetary shocks have the real effects. We consider more general information structures and show that the real effects can be decomposed into the unanticipated part and the anticipated part. By this result, we can use the generalized Lucas island model to study the effects of policy announcement, which generates anticipated monetary shocks, on the real economy. We also study revealed information in rational expectations equilibria under informational asymmetry and discuss some implication for monetary policy. Concerning Knightian uncertainty, we derive several new results on the Choquet expected utility theory, aiming at future applications to monetary policy.

(4 results)