Lags
Lags refer to the time delay between two related economic variables. It is a concept used in economics and finance to describe the amount of time that passes between a cause and its effect. For example, when the Federal Reserve increases interest rates, it may take several months for the effects of the rate change to be felt in the economy. This time delay is known as a lag.
Lags are important to consider when making economic decisions. For example, if the Federal Reserve increases interest rates, it may take several months for the effects of the rate change to be felt in the economy. This means that the Federal Reserve must anticipate the effects of its decisions and take into account the lags that will occur before the effects are felt.
The concept of lags is also used in finance. For example, when a company issues a dividend, the stock price may not immediately reflect the dividend payment. This is because investors may take some time to adjust their portfolios to reflect the new dividend payment. This time delay is known as a dividend lag.
History of Lags
The concept of lags has been around since the early days of economics. In the 18th century, economist Adam Smith wrote about the concept of lags in his book The Wealth of Nations. Smith argued that economic decisions should take into account the lags that will occur before the effects of the decision are felt.
In the 19th century, economist John Stuart Mill wrote about the concept of lags in his book Principles of Political Economy. Mill argued that economic decisions should take into account the lags that will occur before the effects of the decision are felt.
In the 20th century, economist John Maynard Keynes wrote about the concept of lags in his book The General Theory of Employment, Interest, and Money. Keynes argued that economic decisions should take into account the lags that will occur before the effects of the decision are felt.
Table of Comparisons
| Type of Lag | Time Delay |
|---|---|
| Interest Rate Lag | 3-6 Months |
| Dividend Lag | 1-2 Months |
| Monetary Policy Lag | 6-12 Months |
Summary
Lags refer to the time delay between two related economic variables. It is a concept used in economics and finance to describe the amount of time that passes between a cause and its effect. For example, when the Federal Reserve increases interest rates, it may take several months for the effects of the rate change to be felt in the economy. This time delay is known as a lag. Lags are important to consider when making economic decisions, as they can have a significant impact on the outcome of the decision.
For more information about lags, you can visit the websites of the Federal Reserve, the World Bank, and the International Monetary Fund. These websites provide detailed information about lags and their effects on the economy.
See Also
- Interest Rate
- Monetary Policy
- Dividend
- Inflation
- Unemployment
- GDP
- Exchange Rate
- Debt
- Deficit
- Credit
