INTERNATIONAL ECONOMIC COORDINATION IN THE G7 AS A DYNAMIC NASH GAME1

The pursuit of national economic strategies, with a degree of international consultation and coordination as practiced in the Group of Seven, is characterised as a time consistent Nash game, between policy optimising countries and foreign exchange markets, with consistent expectations. The IMF MULTIMOD model, as developed in INTERMOD by the Canadian Department of Finance, is used to produce a numerical solution, by methods which are explained. The use of such methods makes available parameters for defining and negotiating policies which offer politically realistic forms and degrees of national autonomy and international coordination.