Y2K

Stephanie Schmitt-Grohe and Martín Uribe ()

Review of Economic Dynamics, 1999, vol. 2, issue 4, 850-856

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)

Keywords: Y2K problem; investment dynamics (search for similar items in EconPapers)
JEL-codes: E22 E32 (search for similar items in EconPapers)
Date: 1999
Note: A technical appendix is available under handle RePEc:red:append:grohe99
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Related works:
Working Paper: Online Appendix to Y2K (1998)
Working Paper: Y2K (1998)
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DOI: 10.1006/redy.1999.0065

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