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The boom and bust in information technology investment

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Author Info
Mark C. Doms

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Abstract

The growth rate of business investment in information technology boomed in the 1990s and 2000 before plunging in 2001. This boom and bust raises some natural questions: what were the reasons for the accentuated swings in growth rates, and, more importantly, what do those reasons portend for the future of IT investment? Much of the increase in IT investment in the late 1990s appears to be attributable to falling prices of IT goods, which in turn is largely attributable to technological change. However, IT investment was much higher in 1999 and 2000 than a model would predict. Another reason for the high growth rates in IT investment was that expectations were too high, especially in two sectors of the economy, telecommunications services and the dot-com sector. Looking ahead, technological change in the IT area will likely continue to move quickly, in large part because large amounts of research and development are being devoted to finding further technological breakthroughs.

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Publisher Info
Article provided by Federal Reserve Bank of San Francisco in its journal Economic Review.

Volume (Year): (2004)
Issue (Month): ()
Pages: 19-34
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Handle: RePEc:fip:fedfer:y:2004:p:19-34

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Related research
Keywords: Information technology Capital investments Business cycles

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Jaison R. Abel & Ernst R. Berndt & Alan G. White, 2003. "Price Indexes for Microsoft's Personal Computer Software Products," NBER Working Papers 9966, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  2. Stephen D. Oliner & Daniel E. Sichel, 2002. "Information technology and productivity: where are we now and where are we going?," Economic Review, Federal Reserve Bank of Atlanta, issue Q3, pages 15-44. [Downloadable!]
    Other versions:
  3. Mark E. Doms & Wendy E. Dunn & Stephen D. Oliner & Daniel E. Sichel, 2003. "How fast do personal computers depreciate? concepts and new estimates," Working Papers in Applied Economic Theory 2003-20, Federal Reserve Bank of San Francisco. [Downloadable!]
    Other versions:
  4. Mark Doms & Chris Forman, 2003. "Prices for local area network equipment," Working Papers in Applied Economic Theory 2003-13, Federal Reserve Bank of San Francisco. [Downloadable!]
    Other versions:
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Ellen R. McGrattan & Edward C. Prescott, 2007. "Unmeasured Investment and the Puzzling U.S. Boom in the 1990s," NBER Working Papers 13499, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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This page was last updated on 2008-9-4.

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