Nonetheless, given the pervasiveness of the problems involved, I suspect that even the most thoroughly prepared organizations are concerned that something significant might be missed. Consequently, responsible and careful organizations are developing extensive contingency plans to work around any emerging problems as insurance against Y2K disruptions.
But we have to face this challenge, because temporary and persistent shocks to productivity growth may have opposite effects on inflation developments. If the decline in productivity growth is temporary, its effect on aggregate demand is likely to be limited because the lifetime incomes of households are not significantly affected. At the same time, the aggregate supply of output will be temporarily depressed.