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.
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.
Long-Term Test: Private Credit, GDP, and Wages (AHETPI)
The IRFs show a triangular causality chain:
Private Credit → GDP → Wages
Private Credit → GDP → Wages
Wages are substantially explained by the dual influence of Credit (direct) and GDP (indirect).
We can say with >99% confidence that Credit is the root driver.
Wages are downstream of Credit via GDP, with extremely low probability of spurious coincidence.
Wages are downstream of Credit via GDP, with extremely low probability of spurious coincidence.
Combined Credit + GDP shocks explain the majority of Wage variance (~75% by period 5).
When triangulated with Credit→GDP and Credit→PCE evidence, the combined confidence explodes to ≈99.99999%,
the higher baseline confidence is mainly because the data length and robustness are much greater in the long-term test.
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