Optimal Policy in OG Models

Christian Ghiglino, Mich Tvede

Research output: Working paperResearch

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In the present paper general stationary overlapping generations economies with many commodities in every period and many different consumers in every generation are considered. A government maximizes an utilitarian social welfare function, that is the sum of weighted averages of utilities for generations, through fiscal policy, i.e. monetary transfers and taxes. Both situations with and without time discounting are considered. It is shown that if the discount factor is suffciently close to one then the optimal policy stabilizes the economy, i.e. the equilibrium path has the turnpike property. Moreover the fiscal policy is shown to be time-consistent.
Original languageEnglish
Place of PublicationKøbenhavn
PublisherHandelshøjskolen i København
Number of pages25
Publication statusPublished - 1998
SeriesWorking Paper / Department of Economics. Copenhagen Business School

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