September 26, 2000

The early stages of the millennium bug (i.e., the second half of last year) had a significant effect on aggregate demand, individuals and businesses that had been preparing for the worst had accelerated much of their planned purchases into 1999. This led to stronger than-expected real GDP growth. But to the extent that the millennium bug caused a temporal shift, we expected the economy during 2000 to work off the accumulated inventory. Thus, our view is that much of the current economic slowdown is attributable to Y2K.

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