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About: Outside lag     Goto   Sponge   NotDistinct   Permalink

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In economics, the outside lag is the amount of time it takes for a government or central bank's actions, in the form of either monetary or fiscal policy, to have a noticeable effect on the economy. Its converse is the inside lag, the amount of time it takes the policy authority to recognize that a situation calls for a policy response and to decide on that response and implement it. The outside lag can be a major problem, and must be taken into account in deciding what expansionary or contractionary policy actions to implement and, indeed, whether to implement any at all.