Economic consequences of the millennium bug

If well anticipated by firms and the government in the Netherlands as well as abroad, the millennium bug may have only minor negative economic effects. However, such an outcome is no absolute certainty. This paper therefore analyses some risks with respect to Y2K. In assessing these risks we have made various pessimistic assumptions.

The quantitative analysis distinguishes four components -domestic supply effects, initial domestic demand effects, foreign influence and structural effects- which all exert a separate influence on the ultimate economic consequences of Y2K. In a scenario in which all pessimistic assumptions occur simultaneously the result is a negative effect on the Gross Domestic Product (GDP) of at the most ¾ to 1% in the year 2000. Such an effect, however, will largely be compensated for by related positive effects after 2000.