TY - JOUR
T1 - Illustrating the importance of Austrian business cycle theory
T2 - A reply to Murphy, Barnett, and Block; A call for quantitative study
AU - Young, Andrew T.
PY - 2011/3
Y1 - 2011/3
N2 - 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.
AB - 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.
KW - Austrian business cycle theory
KW - Econometric methodology
UR - http://www.scopus.com/inward/record.url?scp=79952815658&partnerID=8YFLogxK
U2 - 10.1007/s11138-010-0126-0
DO - 10.1007/s11138-010-0126-0
M3 - Review article
AN - SCOPUS:79952815658
SN - 0889-3047
VL - 24
SP - 19
EP - 28
JO - Review of Austrian Economics
JF - Review of Austrian Economics
IS - 1
ER -