Umm, are these in fact “other *studies*, or just “other *blog posts*”?

Congrats to Mark.

]]>Also, the correlations shown in Figure 1 and 2 seem greatly dependent on the data for Greece. Excluding it in figure 2 lowers r2 a lot, so that the association between both variables looks almost irrelevant.

]]>Tom, Yes, Keynesians need to do much more work to prove their point. I wish them luck.

]]>“In the Euro Area the R-squared value tells us the proportion of NGDP growth variation that can be explained by the estimated linear relationship between NGDP and CAPB. While large (56.5%) it is a long way from 100%. There’s clearly other things going on here.”

The R-squared is close to zero for plot #3 (“Monetary Policy Zone”). Does that say there’s likely other things going on there as well? Does it make sense to try to factor in some of those things? For example: growth trends for the different monetary policy zones?

]]>I’ll do a separate post on whether the non-zero bound countries should be included.

]]>As the datasets includes both ZLB and non-ZLB economies I was initially confused as to how they were relevant to disproving the claim that “Fiscal austerity is contractionary at the zero bound regardless of whether you have an independent central bank.”.

But I think the answer is this: The dataset includes some economies at the ZLB. If the Keynesian were right then these economies would have had contractions if they had fiscal austerity, and the regression line would slope down just like in charts 1 and 2. The fact that it doesn’t is the proof Scott was pointing at.

]]>“1. Keynesian: Fiscal austerity is contractionary at the zero bound regardless of whether you have an independent central bank.

“2. Market monetarist: Fiscal austerity is contractionary if you lack an independent central bank.”

To test these two theories against each other, we want to look at countries and situations where one of them is true and one is false. If either is false, then the country engaged in austerity but did not experience a contraction. So those are the conditions that we want to look at.

If the Keynesian theory is true and the market monetarist theory is false, then the country did not have an independent central bank and was not at the zero lower bound. If the market monetarist theory is true and the Keynesian theory is false, then the country did have an independent central bank and was at the zero lower bound.

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