DISTRIBUTED LAGS AND THE EFFECTIVENESS OF MONETARY POLICY.
PRINCETON UNIV N J ECONOMETRIC RESEARCH PROGRAM
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As a result of an apparent revival of interest in monetary theory and policy, a considerable amount of effort has been devoted recently to an analysis of the operational lags to which monetary policy is subject. Underlying this interest in the time-form of the response of income to changes in monetary policy is the notion that the potential effectiveness of monetary policy is a function of the speed with which income responds to changes in the money supply. It seems to be accepted, more in general, perhaps, than in any particular case, that if aggregate demand responds with a long distributed lag to changes in the money supply, the scope for contracyclical monetary management may be quite limited. This paper is devoted to a formal analysis of the relationship between the speed of adjustment of income to changes in the money supply and the effectiveness of contracyclical monetary policy. Author
- Economics and Cost Analysis
- Operations Research