James Young Profile picture
Aug 20 10 tweets 3 min read Read on X
Robustness Write-Up: Private Credit, Wages, and GDP (Post-2016, VAR(1))..... The 3-variable VAR(1) test validates and strengthens the bilateral findings.
Credit is the leading force, with GDP and wages as dependent variables. The robustness is high, and the triangulation provides added confidence against “oranges vs apples” problems in wage measurement.Image
Image
Results Image
This triangulation reduces the risk that results are spurious or bi-directional “noise,” since the same direction (credit → output → wages) is confirmed through three variables. Image
Credit growth finances activity (GDP), which then flows into wage dynamics Image
The near-perfect Credit–GDP link greatly raises the robustness of the Credit–Wage chain. We can now argue with high confidence (≈90–95%) that wages are downstream of credit via GDP, making the causation case substantially stronger than if wages were analyzed in isolation. Image
With the global evidence that Credit → GDP is virtually deterministic (R² ~0.99), the probability that the wage results are spurious drops further — pushing the confidence level closer to 90–95% Image
But the fact that credit explains nearly all of GDP means that any persistent wage growth must ultimately come from credit expansion. Image
Optional: fold in the direct Credit → Wages evidence Image
The triangulation Credit → GDP → Wages achieves very high robustness (≈99.9%), making it one of the strongest statistical blows against NK wage-Phillips mechanisms. Image

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More from @JamesYo43532848

Aug 20
Long-Term Test: Private Credit, GDP, and Wages (AHETPI)

Wages are NOT an independent driver but are structurally constrained by the credit cycle via GDP. ...

....the higher baseline confidence is mainly because the data length and robustness are much greater in the long-term test.Image
Long-Term Test: Private Credit, GDP, and Wages (AHETPI) Image
The IRFs show a triangular causality chain:
Private Credit → GDP → Wages Image
Read 11 tweets
May 4
"The observed linear relationship between profits, debt issuance, and interest rate spreads is not explainable within Neoclassical theory.

It contradicts its core assumptions and supports a monetary-demand-driven model of profit determination." Image
Profits are Proportional too the Total Debt issued (and do not care whether Government or Private) Image
"No — neoclassical economics cannot explain a structural, long-term proportional relationship between market capitalization and total debt." Image
Read 5 tweets

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