BROWSE

Implementation Lag

What is '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.

Explaining '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.


Further Reading


Education and saving:: The long-term effects of high school financial curriculum mandates
www.sciencedirect.com [PDF]
… This indicates that the effects of mandates were gradual, perhaps reflecting lags associated with curriculum … the earliest policy in 1957, and most of the policies were implemented in the … If no information on implementation date was available, the first class affected was assumed …

Implementation lag and the investment decisionImplementation lag and the investment decision
www.sciencedirect.com [PDF]
… This indicates that the effects of mandates were gradual, perhaps reflecting lags associated with curriculum … the earliest policy in 1957, and most of the policies were implemented in the … If no information on implementation date was available, the first class affected was assumed …

Foreign direct investment in the financial sector and economic growth in Central and Eastern Europe: The crucial role of the efficiency channelForeign direct investment in the financial sector and economic growth in Central and Eastern Europe: The crucial role of the efficiency channel
www.sciencedirect.com [PDF]
… This indicates that the effects of mandates were gradual, perhaps reflecting lags associated with curriculum … the earliest policy in 1957, and most of the policies were implemented in the … If no information on implementation date was available, the first class affected was assumed …

International financial reporting standard (IFRS): Benefits, obstacles and intrigues for implementation in NigeriaInternational financial reporting standard (IFRS): Benefits, obstacles and intrigues for implementation in Nigeria
eprints.covenantuniversity.edu.ng [PDF]
… This indicates that the effects of mandates were gradual, perhaps reflecting lags associated with curriculum … the earliest policy in 1957, and most of the policies were implemented in the … If no information on implementation date was available, the first class affected was assumed …

What results when firms implement practices: The differential relationship between specific practices, firm financial performance, customer service, and quality.What results when firms implement practices: The differential relationship between specific practices, firm financial performance, customer service, and quality.
psycnet.apa.org [PDF]
… This indicates that the effects of mandates were gradual, perhaps reflecting lags associated with curriculum … the earliest policy in 1957, and most of the policies were implemented in the … If no information on implementation date was available, the first class affected was assumed …

Financial development and economic growth in Pakistan: evidence based on autoregressive distributed lag (ARDL) approachFinancial development and economic growth in Pakistan: evidence based on autoregressive distributed lag (ARDL) approach
journals.sagepub.com [PDF]
… This indicates that the effects of mandates were gradual, perhaps reflecting lags associated with curriculum … the earliest policy in 1957, and most of the policies were implemented in the … If no information on implementation date was available, the first class affected was assumed …

The impact of financial development, economic growth and energy consumption on environmental degradationThe impact of financial development, economic growth and energy consumption on environmental degradation
www.emerald.com [PDF]
… This indicates that the effects of mandates were gradual, perhaps reflecting lags associated with curriculum … the earliest policy in 1957, and most of the policies were implemented in the … If no information on implementation date was available, the first class affected was assumed …

Money-financed fiscal stimulus: The effects of implementation lagMoney-financed fiscal stimulus: The effects of implementation lag
www.sciencedirect.com [PDF]
… This indicates that the effects of mandates were gradual, perhaps reflecting lags associated with curriculum … the earliest policy in 1957, and most of the policies were implemented in the … If no information on implementation date was available, the first class affected was assumed …

Trends in park tourism: Economics, finance and managementTrends in park tourism: Economics, finance and management
www.tandfonline.com [PDF]
… This indicates that the effects of mandates were gradual, perhaps reflecting lags associated with curriculum … the earliest policy in 1957, and most of the policies were implemented in the … If no information on implementation date was available, the first class affected was assumed …



Q&A About Implementation Lag


How does the outside lag differ from the inside lag?

The inside lag occurs when a policy authority recognizes that a situation calls for a policy response and decides on that response, but implementation has not yet occurred.

When do you need to consider recognition lag as well as implementation lag?

You need to consider recognition lag as well as implementation lag whenever you are trying to understand how long it takes for monetary policy changes to affect the economy.

Why are long lags problematic?

Long lags are problematic because they may be variable and unpredictable. Even though similar policies were implemented in the past, they hit the economy after some time had passed.

What is the 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.

What is the outside lag?

The outside lag is the amount of time it takes for a government's actions to have an effect on the economy.

What can cause problems with an outside lag?

An outside lag can be problematic because economic prediction is difficult. Active use of monetary or fiscal policy could actually have a destabilizing effect.

How long can implementation lag last?

Implementation lag can be short or long depending on whether policy makers have a definite course of action or must deliberate on the right action to take.

What does "proper implementation" mean in this context?

Proper implementation means that it has to happen incrementally, rather than all at one time.