Recognition Lag

DEFINITION of 'Recognition Lag'

The time lag between when an actual economic shock, such as sudden boom or bust occurs, and when it is recognized by economists, central bankers and the government.

The recognition lag is studied in conjunction with implementation lag and response lag, two other measures of time lags within an economy. Recognition lags may be days, weeks, or months, depending on the nature and severity of the economic shock or shift.

BREAKING DOWN 'Recognition Lag'

Followers of the market are familiar with the phenomenon of when economists signal a recession in the economy several months after it has actually begun. This is because it can take several months for data metrics that are studied to predict economic shifts to be aggregated and published for the investing public.

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