Is Policy Coordination Necessary to Achieve Efficient Stabilization Policies?

For a general linear-quadratic differential game model of macroeconomic policies with two policy-makers, we derive no-memory non-cooperative feedback Nash equilibrium strategies and Pareto-optimal strategies. Since the non-cooperative equilibrium solution in general is inefficient, policy coordination provides advantages but may not be sustainable, if only memoryless strategies are considered. However, if memory strategies are admitted, then there may exist subgame-perfect efficient noncooperative equilibrium solutions, and efficient stabilization policies may be achieved without policy coordination.