Review article
THE PHENOMENON OF LAG IN APPLICATION OF THE MEASURES OF MONETARY POLICY
Tihomir Jovanovski
Mehmed Muric
Abstract
This paper discusses the theoretical aspect of the phenomenon of lag in the application of the
measures of monetary policy. Monetary and fiscal policy faces the phenomenon of lag. One
of the controversial and pressing questions of monetary policy is the nature and length of lag
between the application of the measures of monetary policy and the effects on
macroeconomic aggregates. While the monetary strategy points to several possible reasons
for the lag, there is no general agreement on the length of the lag. The study of the
phenomenon of lag imposes two questions: what does the lag of the application of monetary
processes and policy imply and why are the asset holders not capable of immediately
adjusting their portfolios at the time of disbalance? There are two categories of lag known in
economic literature: the inside lag (which encompasses the recognition of the problem and
the implementation of measures) and the outside lag (which encompasses the reaction of
macroeconomic aggregates to the applied measures of monetary policy). The paper
descriptively notes the different identifications of time lag and provides schematic
representations of the effects of the observed phenomenon.
Keywords
Monetary Policy; measures of monetary policy; time lag; problems of lag; consequences
Hrčak ID:
70519
URI
Publication date:
1.6.2011.
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