Question

How does Information lag affect economic policies?

Answer 1

Information lag means the time duration taken to spread the information and recognized by the concerned authorities, people and other entities. Information lag makes the government, central bank (Fed) or other authorities to recognize the problem late and it further delays the formation of the policies and its implementation. As a result, the policy will impact slowly and it will take more time for the economy to recover from the economic problems such as recession. For example, inside lag ( a type of information lag) is the information lag where the authorities lately recognized the problem of recognition after the financial crisis of 2008. It further delayed the time taken to prepare and apply a policy. When it happened, the recession was already spread and it took longer time for the economic policies show its impact and resurrect the economy.