tives are strong it may take longer for a given decline in the rate of money growth to terminate the expansion than at a time when investment incentives are weak, even though in both cases a dollar change in bank reserves may require as much time to have its particular effect on income.14
To summarize this discussion, it has been shown that a badly timed monetary policy may be destabilizing rather than stabilizing. And the various empirical estimates of the lag of monetary policy which have been undertaken suggest that the lag is long enough for this possibility to be one which must be taken seriously. There is some empirical evidence that the lag is highly variable, but it is subject to some objections. All in all, a great deal of additional work will have to be done before we have an adequate knowledge about the lags of monetary policy.
Obvious sources for further reading are the various studies of the outside lag listed in the appendix, together with the criticisms listed in footnote 11 on page 183. Several of these studies are summarized in V. Argy, "The Lags in Monetary Policy: An Assessment of Alternative Approaches," in Banca Nazionale del Lavoro, Quarterly Review, No. 73 ( June, 1965), pp. 3-13. This list, together with the Friedman paper discussed in the beginning of the chapter, comprise close to all of the literature available on this topic. But for a general mathematical discussion of the timing of stabilization policy see also A. W. Phillips, "Stabilization Policy and the Time-Forms of Lagged Responses," Economic Journal, Vol. 68 ( June, 1957), pp. 265-277; and William Baumol, "Pitfalls in Contracyclical Policies: Some Tools and Results," Review of Economics and Statistics, Vol. 43 ( February, 1961), pp. 21-26. For studies of the outside lag see also Patric Hendershott , "The Inside Lag in Monetary Policy: A Comment," Journal of Political Economy, Vol. 74 ( October, 1966), pp. 519-523; and Mark Willes, "The Inside Lags of Monetary Policy: 1952-1960," Journal of Finance, Vol. 22 ( December, 1967), pp. 591-594.____________________