Optimal policy in OG models

In the present paper general stationary overlapping generations economies w ith many commodities in every period and many different consumers in every generation are considered. A government maximizes a utilitarian social welf are function, which is the sum of weighted averages of utilities for genera tions, through fiscal policy, i.e., monetary transfers and taxes. Situation s both with and without time discounting are considered. It is shown that i f the discount factor is sufficiently 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. Classification Numbers: D51, D91, E32, E52, H20 (C) 2000 Academic Press.