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Transmission Mechanism and its Lag and Uncertainty.
The Central Bank (RBA) carries out monetary policy with the aim of protecting the value of Australia money by keeping inflation low and stable. Monetary policy is implemented mainly through changes in the cash rate, which influence other interest rates and affect the level of spending and economic activity in the country. Nevertheless, changes to the cash rate do not immediately affect the economy in a manner that is readily predictable. The transmission mechanism of monetary policy has long and variable lags because the economy takes time to adjust to changes in monetary conditions (for e…
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