Dynamic Analysis of Two Policy Lags in a Kaldorian Model

Abstract

We examine the effects of policy lags on local economic stability using a Kaldorian model. This study analyzes two cases: the case of a monetary policy with a time lag and the case of a policy with both fiscal and monetary lags. Similar to the case of fiscal policy lags examined in a previous study, monetary policy lags have destabilizing effects on economic stability. However, in the case of the existence of both fiscal and monetary policy lags, there is a possibility that a monetary policy lag can stabilize an economy.