The Closed Economy: Absence of a Deficit Target. -- Monetary Policy -- Fiscal Policy -- Monetary and Fiscal Interaction -- Monetary and Fiscal Cooperation -- The Closed Economy: Presence of a Deficit Target -- Fiscal Policy -- Monetary and Fiscal Interaction -- Monetary and Fiscal Cooperation -- Monetary Policies in Europe and America -- Monetary Interaction between Europe and America: Case A -- Monetary Interaction between Europe and America: Case B -- Monetary Interaction between Europe and America: Case C -- Monetary Cooperation between Europe and America: Case A -- Monetary Cooperation between Europe and America: Case B -- Monetary Cooperation between Europe and America: Case C -- Fiscal Policies in Europe and America:Absence of a Deficit Target. -- Fiscal Interaction between Europe and America -- Fiscal Cooperation between Europe and America -- Fiscal Policies in Europe and America: Presence of a Deficit Target -- Fiscal Interaction between Europe and America -- Fiscal Cooperation between Europe and America -- Monetary and Fiscal Policies in Europe and America:Absence of a Deficit Target -- Monetary and Fiscal Interaction between Europe and America -- Monetary and Fiscal Cooperation between Europe and America -- Monetary and Fiscal Policies in Europe and America:Presence of a Deficit Target -- Monetary and Fiscal Interaction between Europe and America: Case A -- Monetary and Fiscal Interaction between Europe and America: Case B -- Monetary and Fiscal Interaction between Europe and America: Case C -- Monetary and Fiscal Cooperation between Europe and America -- Cooperation within Regions, Interaction between Regions.

This book studies the strategic interactions between monetary and fiscal policies in the world economy. The world economy consists of two regions, say Europe and America. The policy makers are the central banks and the governments. The policy targets are low inflation, low unemployment, and low structural deficits. There are demand shocks, supply shocks, and mixed shocks. There are regional shocks and common shocks. This book develops a series of basic, intermediate, and more advanced models. Here the focus is on the Nash equilibrium. The key questions are: Given a shock, can policy interactions reduce the existing loss? And to what extent can they do so? Another topical issue is policy cooperation. To illustrate all of this there are a lot of numerical examples.