NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Optimal Control of the Money Supply

Robert B. Litterman

NBER Working Paper No. 912*
Issued in June 1982
NBER Program(s):   EFG

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.

*Published: FRBM, Vol. 1982, no. 4 (1982): 1-9.

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