What are the 4 lags monetary policy usually needs to address?

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Expert Solution

Explanation:

4 Lags in monetary policy that needs to be addressed:

Recognition lag:

The recognition lags meant to be the time within development of need of action and recognition being required by the monetary authority. Sometime it is difficult for the monetary authority to recognize the need of action and action of a turning point in particular business cycle.

Administrative lag:

Administrative lag refers to be the time period that happens as monetary authority find the need of action and the action actually taken on particular data. Administrative lags could be of different length with monetary policy consideration and with monetary policy’s decision making authority.

Operation lag:

Operation lag meant to be time taken between monetary policy adoption and last impact of the policy on economic activity.

Time lag:

Time lag meant to be the delay normally we can find between economic actions and its consequences. Time lags impact takes times to occur in reality.

Rahul Sunny answered 1 year ago

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