One of the most pronounced unintended effects of monetary and fiscal policy is response lag. When changing their approach to policy, central banks usually cannot have an instant impact on the economy. Interest rate changes, for example, are subject to a fairly long lag before it takes effect. Even monetary supply controls do not have an immediate impact on the economy due to money velocity. An issue that arises then is that the policy changes are enacted at one point in time and only start making waves at some later point. Any delay to effects, when changes are implemented, makes…...
Using Alternative Data to Observe Fiscal Policy
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