NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Optimal Control of the Money Supply

Robert B. Litterman

NBER Working Paper No. 912
Issued in June 1982
NBER Program(s):Economic Fluctuations and Growth Program

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.

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Document Object Identifier (DOI): 10.3386/w0912

Published: Quarterly Review, Federal Reserve Bank of Minneapolis, Fall 1982, 6(3): 1-9. citation courtesy of

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