Illustrating the importance of Austrian business cycle theory: A reply to Murphy, Barnett, and Block; A call for quantitative study

Illustrating the importance of Austrian business cycle theory: A reply to Murphy, Barnett, and... Murphy et al. (2009) criticize Young’s (2005) test of Austrian business cycle theory (ABCT) using US industry-level quarterly job reallocation data and the federal funds rate as a monetary policy indicator. I argue that not only are Murphy et al.’s specific criticisms misguided; more importantly, they all but completely rule out the type of empirical study that Young (2005) advocates: specifically, one that (1) is quantitative and distinguishes between statistical and economic significance and (2) attempts to exploit a hypothesis that is both a prediction of ABCT and not a prediction of competing monetary theories of the cycle. I argue that empirical studies embodying (1) and (2) are critical to ABCT as a research program. Furthermore, I review the existing econometric studies of ABCT from the last 10 years and conclude that there is much room for improvement along these lines. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Review of Austrian Economics Springer Journals

Illustrating the importance of Austrian business cycle theory: A reply to Murphy, Barnett, and Block; A call for quantitative study

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Publisher
Springer US
Copyright
Copyright © 2010 by Springer Science+Business Media, LLC
Subject
Economics; Public Finance; Political Science; History of Economic Thought/Methodology
ISSN
0889-3047
eISSN
1573-7128
D.O.I.
10.1007/s11138-010-0126-0
Publisher site
See Article on Publisher Site

Abstract

Murphy et al. (2009) criticize Young’s (2005) test of Austrian business cycle theory (ABCT) using US industry-level quarterly job reallocation data and the federal funds rate as a monetary policy indicator. I argue that not only are Murphy et al.’s specific criticisms misguided; more importantly, they all but completely rule out the type of empirical study that Young (2005) advocates: specifically, one that (1) is quantitative and distinguishes between statistical and economic significance and (2) attempts to exploit a hypothesis that is both a prediction of ABCT and not a prediction of competing monetary theories of the cycle. I argue that empirical studies embodying (1) and (2) are critical to ABCT as a research program. Furthermore, I review the existing econometric studies of ABCT from the last 10 years and conclude that there is much room for improvement along these lines.

Journal

The Review of Austrian EconomicsSpringer Journals

Published: Sep 1, 2010

References

  • Austrian business cycle theory: Empirical evidence
    Bismans, F; Mougeot, C
  • The flow approach to labor markets: New data sources and micro-macro links
    Davis, SJ; Faberman, J; Haltiwanger, J

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