Macroeconomic Vulnerabilities in the Twenty–first Century Economy: A Preliminary Taxonomy

James DeLong ()

International Finance, 2002, vol. 5, issue 2, 285-309

Abstract: Our current information technological revolution is, by crude metrics, two to three times the relative size of previous industrial revolutions which transformed the economy and the world. However, at the moment, it is anyone’s guess what changes in macroeconomic vulnerabilities and opportunities our current industrial revolution will bring. It seems highly likely that it will bring a better–performing labour market. It also seems highly likely that it will bring larger swings in asset prices and investment demand, which will call for more aggressive counter–cyclical monetary policy. It is possible that it will bring a reduction in the size of the inventory–driven component of the business cycle, and that it will add to the difficulties of financial regulation as complexity increases the government’s task while euphoria diminishes its competence.

Date: 2002
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