Tuesday, December 15, 2015

Who said macroeconomics isn't an experimental science?

Well, according to the econoblogosphere echo-chamber, it looks like were going to get a rate hike tomorrow. That means we get a test of a couple theories ... one pseudo-scientific and two scientific:

  • An interest rate hike will be a contractionary signal leading to lower inflation and lower NGDP. However interpreting this signal based on the Fed's statements will be similar to interpreting tea leaves and allows most of the establishment macro profession and even upstart market monetarists to say whatever happens is consistent with whatever their model is or whatever post hoc reading of the Fed statement makes the status quo make sense retroactively.
  • And interest rate hike will cause a neo-Fisherite rise in inflation
  • The interest rate hike will mostly have an effect on the monetary base [from me]

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