Implementation Lag

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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.

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