Implementation Lag


DEFINITION of 'Implementation Lag'

The time lag between when a macroeconomic shock or other adverse condition is recognized by central banks and the government, and when a corrective action is put into place. The response lag may be short or long, depending on whether policy makers have a definite course of action or must deliberate on the right action to take. Also, proper implementation of the corrective action may have to happen incrementally, rather than all at one time.

BREAKING DOWN 'Implementation Lag'

The implementation lag follows the recognition lag, which measures how long it takes before the adverse condition is even noticed. Because the broad economy is such a complex set of moving parts, time delays are inevitable when trying to recognize, diagnose and fix macroeconomic shocks.

While the Federal Reserve Board has a preset schedule of when to meet to discuss monetary policy changes, they can decide to step in whenever they see fit to change interest rates, buy or sell Treasuries, or otherwise assist the economy.

  1. Monetary Policy

    Monetary policy is the actions of a central bank, currency board ...
  2. Federal Funds Rate

    The interest rate at which a depository institution lends funds ...
  3. Recognition Lag

    The time lag between when an actual economic shock, such as sudden ...
  4. Federal Open Market Committee - ...

    The branch of the Federal Reserve Board that determines the direction ...
  5. Response Lag

    The time lag between when a corrective action is taken in the ...
  6. Federal Reserve Board - FRB

    The governing body of the Federal Reserve System. The seven members ...
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