Optimal Control of the Money Supply
72 Pages Posted: 19 Jun 2004 Last revised: 1 Jul 2010
Date Written: June 1982
Using optimal control theory and a vector autoregressive representation of the relationship between money and interest rates, one can derive a feedback control procedure which defines the best possible tradeoff between interest rate volatility and money supply fluctuations and which could be used to reduce both from their current levels.
Suggested Citation: Suggested Citation