Recognition Lag

AAA

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.

INVESTOPEDIA EXPLAINS '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.

RELATED TERMS
  1. Discount Rate

    The interest rate charged to commercial banks and other depository ...
  2. Recession

    A significant decline in activity across the economy, lasting ...
  3. Implementation Lag

    The time lag between when a macroeconomic shock or other adverse ...
  4. Discount Window

    Credit facilities in which financial institutions go to borrow ...
  5. Federal Reserve Board - FRB

    The governing body of the Federal Reserve System. The seven members ...
  6. Monetary Policy

    The actions of a central bank, currency board or other regulatory ...
RELATED FAQS
  1. What are the advantages of free trade over mercantilism?

    Free trade provides advantages over mercantilism for individuals, businesses and nations. A key advantage of free trade for ... Read Full Answer >>
  2. How does money supply affect inflation?

    Definitions matter when describing the relationship between changes in the money stock, or total money supply, and inflation. ... Read Full Answer >>
  3. What are the different ways that utility is measured in economics?

    It's difficult to measure a qualitative concept such as utility, but economists try to quantify it in two different ways: ... Read Full Answer >>
  4. What is the difference between adverse selection and moral hazard?

    In economics, moral hazard and adverse selection are two possible consequences of asymmetric information or ineffective information ... Read Full Answer >>
  5. Are all fixed costs considered sunk costs?

    In accounting, finance and economics, all sunk costs are fixed costs. However, not all fixed costs are considered to be sunk. ... Read Full Answer >>
  6. What caused the American Industrial Revolution?

    The initial vestiges of industrialization appeared in the United States in 1790, when Samuel Slater opened a British-style ... Read Full Answer >>
Related Articles
  1. Bonds & Fixed Income

    Breaking Down The Fed Model

    Learn what pundits mean when they say that stocks are undervalued according to the Fed model.
  2. Personal Finance

    How The U.S. Government Formulates Monetary Policy

    Learn about the tools the Fed uses to influence interest rates and general economic conditions.
  3. Options & Futures

    Explaining The World Through Macroeconomic Analysis

    From unemployment and inflation to government policy, learn what macroeconomics measures and how it affects everyone.
  4. Economics

    The Importance Of Inflation And GDP

    Learn the underlying theories behind these concepts and what they can mean for your portfolio.
  5. Investing Basics

    Interest Rates And Your Bond Investments

    By understanding the factors that influence interest rates, you can learn to anticipate their movement and profit from it.
  6. Economics

    What is Adverse Selection?

    Adverse selection occurs when one party in a transaction has more information than the other, especially in insurance and finance-related activities.
  7. Economics

    What is a Capital Account?

    Capital account is an economic term that refers to the net change in investment and asset ownership for a nation.
  8. Economics

    What is a Fiduciary?

    A fiduciary is a person who acts on behalf of another person (or people) to manage assets.
  9. Economics

    Understanding the Fisher Effect

    The Fisher effect states that the real interest rate equals the nominal interest rate minus the expected inflation rate.
  10. Fundamental Analysis

    Explaining the Geometric Mean

    The average of a set of products, the calculation of which is commonly used to determine the performance results of an investment or portfolio.

You May Also Like

Hot Definitions
  1. Adverse Selection

    1. The tendency of those in dangerous jobs or high risk lifestyles to get life insurance. 2. A situation where sellers have ...
  2. Wash Trading

    The process of buying shares of a company through one broker while selling shares through a different broker. Wash trading ...
  3. Fixed-Income Arbitrage

    An investment strategy that attempts to profit from arbitrage opportunities in interest rate securities. When using a fixed-income ...
  4. Venture-Capital-Backed IPO

    The selling to the public of shares in a company that has previously been funded primarily by private investors. The alternative ...
  5. Merger Arbitrage

    A hedge fund strategy in which the stocks of two merging companies are simultaneously bought and sold to create a riskless ...
  6. Market Failure

    An economic term that encompasses a situation where, in any given market, the quantity of a product demanded by consumers ...
Trading Center