The optimal control of government stabilization funds

Abel Cadenillas, Ricardo Huamán-Aguilar

Producción científica: Contribución a una revistaArtículorevisión exhaustiva

2 Citas (Scopus)


We study the optimal control of a government stabilization fund, which is a mechanism to save money during good economic times to be used in bad economic times. The objective of the fund manager is to keep the fund as close as possible to a predetermined target. Accordingly, we consider a running cost associated with the difference between the actual fiscal fund and the fund target. The fund manager exerts control over the fund by making deposits in or withdrawals from the fund. The withdrawals are used to pay public debt or to finance government programs. We obtain, for the first time in the literature, the optimal band for the government stabilization fund. Our results are of interest to practitioners. For instance, we find that the higher the volatility, the larger the size of the optimal band. In particular, each country and state should have its own optimal fund band, in contrast to the “one-size-fits-all” approach that is often used in practice.
Idioma originalEspañol
Páginas (desde-hasta)1-24
Número de páginas24
EstadoPublicada - 1 nov. 2020

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