Monetary or Fiscal Policy Time Lag
Monetary policy changes normally take a certain amount of time to have an effect on the economy. The time lag could span anywhere from nine months up to two years. Fiscal policy and its effects on output have a shorter time lag.
What are lags in monetary policy?
The operation lag (or the effects lag) refers to the period of time between the adoption of monetary policy and the final effect of that policy on the economic activity.
Does monetary or fiscal policy have a longer time lag?
There is much less of a time lag for monetary policy than fiscal policy. Monetary policy decisions can be implemented much faster than fiscal policies because the central bank is not a government bureaucracy and the tools they use are more efficient than the tools of fiscal policy.
