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Y2k

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  • Stephanie Schmitt-Grohe

    (Rutgers University)

  • Martin Uribe

    (University of Pennsylvania)

Abstract

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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File URL: http://dx.doi.org/10.1006/redy.1999.0065
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Bibliographic Info

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

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Handle: RePEc:red:issued:v:2:y:1999:i:4:p:850-856

Note: A technical appendix is available under handle RePEc:red:append:grohe99
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Related research

Keywords: Y2K problem; investment dynamics;

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