Question

nobel prize winner milton friedman said that a bad central banker is like a ""fool in the shower."" how does this apply to central banking?

Answer 1

There are monetary policy lags

What is monetary policy lags ?

The presence of temporal delays is one of the drawbacks of countercyclical monetary policy. The monetary authority must have time to recognise the need for action, take that action, and observe how that action affects economic activity. The time relationship between the resultant monetary series and the subsequent series of impacts of monetary operations is how Friedman defines "lag." He claims that economic circumstances are only affected by monetary measures after a "long and varied lag." Friedman makes a distinction between three fundamental lags: the administrative lag, the operation lag, and the recognition lag.

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