This paper studies, within a general equilibrium model, the dynamics of Y2K-type shocks: anticipated, permanent losses in output whose magnitude can be lessened by investing resources in advance. The implied dynamics replicate three observed characteristics of those triggered by the Y2K bug: (1) Precautionary investment: investment in solving the Y2K problem begins before the year 2000; (2) Investment delay: although economic agents have been aware of the Y2K problem since the 1960s, investment did not begin until recently; (3) Investment acceleration: as the new millennium approaches, the amount of resources allocated to solving the Y2K problem increases. In addition, the model predicts that Y2K investment peaks at the end of 1999. (Copyright: Elsevier)
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Article provided by Elsevier for the Society for Economic Dynamics in its journal Review of Economic Dynamics.
Volume (Year): 2 (1999) Issue (Month): 4 (October) Pages: 850-856 Download reference. The following formats are available: HTML
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Handle: RePEc:red:issued:v:2:y:1999:i:4:p:850-856
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