TEORIJA KOOPERATIVNIH IGARA U ANALIZI MONETARNE I FISKALNE POLITIKE NA PRIMJERU REPUBLIKE HRVATSKE / COOPERATIVE GAME THEORY IN THE ANALYSIS OF MONETARY AND FISCAL POLICY ON EXAMPLE OF REPUBLIC OF CROATIA

Abstract

The paper explored the interaction of monetary and fiscal policy by using game theory. After the Introduction it is presented methodological frame through theoretical basis of fiscal and monetary policy, and introducing of game theory. After theoretical part, the analysis was conducted using the collected data and then the results of the paper are presented. A function of payments for monetary and fiscal policy have been created on the basis of the perennial data of inflation, employment rate, total liquidity and the rate of government spending in the Republic of Croatia. To obtain the model parameters multiple linear regression has been used. The obtained result, based on the functions of payments for monetary and fiscal policy, generated the matrix of payments. Solving the model as the two players strategic game with the conflict goals using max-min method we could not obtain a Nash equilibrium solution. Therefore we observed the model as a cooperative game and for obtaining the optimal solution we applied SAW method and method TOPSIS. Then we analysed the sensitivity of the obtained results in terms of assumption when a greater impact on the economy has the fiscal policy and in terms of assumption when a greater impact on the economy has monetary policy. The research resulted in one optimal solution.