[FRB] 'Federal Reserve Board
Testimony of Governor Edward W. Kelley, Jr.
Before the Committee on Commerce, Science, and Transportation, U.S. Senate
April 28, 1998
...
The Macroeconomic Effects of the Millennium Bug
The Year 2000 ("Y2K") problem will touch much more than just our financial system and could
temporarily have adverse effects on the performance of the overall U.S. economy as well as the
economies of many, or all, other nations if it is not corrected. The spectrum of possible outcomes is
broad, for the truth of the matter is that this episode is unique. We have no previous experiences to
give us adequate guideposts. A few economists already are suggesting that Y2K-related disruptions
will induce a deep recession in the year 2000. That is probably a stretch, but I do not think that we
shall escape unaffected. Some of the more frightening scenarios are not without a certain plausibility,
if this challenge were being ignored. But it is not being ignored. While it is probable that preparations
may in some instances prove to be inadequate or ineffective, an enormous amount of work is being
done in anticipation of the rollover of the millennium. It is impossible today to forecast the impact of
this event, and the range of possibilities runs from minimal to extremely serious. In that spirit, let me
review with you some of the ways in which the millennium bug already is influencing the U.S.
economy and discuss some of the possible outcomes for economic activity early in the next century
...
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