The Almon Lag Technique and the Monetary versus Fiscal Policy Debate

Abstract

Abstract This article discusses possible problems associated with the Almon lag technique, caused by misspecification of the length of the lag or the degree of the polynomial. It is argued that the choice of the lag length is particularly treacherous. Finally, two studies of the relative importance of fiscal and monetary policy are reexamined, and it is shown how insufficient attention to these problems has significantly affected their conclusions.