I would like to replicate the paper of Angelini et al (2014) who explore the interaction between capital requirements and monetary policy. Their model is based on that of Gerali et al (2010), which features monopolistic competition in the banking sector, borrowing constraint and capital regulations. In deriving optimal policy parameters, Angelini et al (2014) consider two cases: (1) cooperative case where the two authorities jointly implement their policy rules to minimize a ‘common’ loss function (2) non-cooperative case where each authority minimizes her own loss function, taking other’s policy rule as given.

I guess it should be straightforward to solve for optimal parameters for case (1) using command OSR, since there is ‘common’ loss function. However, I am curious on how to solve for optimal parameters for case (2) when there are two instruments and two different objectives. Can OSR command still be useful?

Hello Tawun
I just met the same problem as you said before. I really want to know how you solved out that non-cooperative case based on Angelini et al(2014) at last?

From what you describe, the OSR-command itself will not be useful, because it maximizes one objective function by choosing appropriate rule coefficients. Your setup here is different. You are looking for a Nash equilibrium, i.e. a fixed point where the oppositve behavior is taken as given.

What is the exact reference and where can I find the description?

Angelini P, Neri S, Panetta F. The interaction between capital requirements and monetary policy[J]. Journal of money, credit and Banking, 2014, 46(6): 1073-1112.

Hi, where can I get the code of Angelini et al(2014), I try to replicate but it is too hard for me, can you please tell me where can I acquire the code? Thank you very much.