Cooperative decision-making on fiscal and monetary policy in Iraq using the prisoner’s dilemma


Creative Commons License
This work is licensed under a Creative Commons Attribution 4.0 International License

This paper investigates the interaction between fiscal and monetary policy in Iraq after 2003 using the prisoner’s dilemma.
The paper aims to determine the best form of coordination between these policies to achieve their goals; payoff matrix for both policies was constructed. To achieve the purpose, the quantitative approach was applied using several methods, including regression, building payoff matrices and decision analysis using a number of software.
The results of the monetary policy payment function show that inflation rate has an inverse relationship with the auctions of selling foreign currency and a positive relationship with the government’s activity, while the fiscal policy function shows that real growth is positively related to price levels (the inverted Phillips curve) and correlates with the government’s activity. After using the Gambit Solution to determine the Nash balance, which is achieved through the expansion strategies of both policies to confirm the results, the Promethee-Gaia method was used for multi-criteria decision making. When the two policies interact with similar forces (50% each), the best decision is one of the expansionary strategies that help achieve their main objectives in the short and long term, represented by price stability and economic growth.
The main conclusion is that the best way to achieve the goals of economic policy in Iraq is that the coordination of procedures between the two policies should be expansionary, since the Iraqi economy needs to be stimulated due to the under-exploitation of many its sectors, such as agriculture and industry.

view full abstract hide full abstract
    • Figure 1. PROMETHEE I at Assumption 1
    • Figure 2. PROMETHEE II at Assumption 1
    • Figure 3. PROMETHEE I at Assumption 2
    • Figure 4. PROMETHEE II at Assumption 2
    • Table 1. Payment function for monetary and fiscal authorities
    • Table 2. Iraqi monetary-fiscal game – payoff matrix
    • Conceptualization
      Ahmed Abdulzahra Hamdan, Safaa Ali Hussein
    • Data curation
      Ahmed Abdulzahra Hamdan, Safaa Ali Hussein
    • Formal Analysis
      Ahmed Abdulzahra Hamdan, Safaa Ali Hussein
    • Investigation
      Ahmed Abdulzahra Hamdan, Safaa Ali Hussein
    • Methodology
      Ahmed Abdulzahra Hamdan
    • Writing – original draft
      Safaa Ali Hussein
    • Writing – review & editing
      Safaa Ali Hussein