IESET.
Hypotheses·monetary·abct_credit_boom_predicts_capital_misallocation_oecd

In an OECD panel 1980-2023, the 5-year cumulative growth of private credit to non-financial corporations (BIS WS_CREDIT) is positively associated with the subsequent (t+1 to t+5) volatility of non-residential fixed investment and with downward revisions to ex-ante TFP growth forecasts.

Countries experiencing the largest credit booms exhibit the largest post-bust capital-stock reallocation episodes, consistent with the Mises-Hayek prediction that artificially-low interest rates produce a structural distortion in the inter-temporal capital structure that must be liquidated when monetary conditions normalise.

SUPPORTEDengine/runs/abct_credit_boom_predicts_capital_misallocation_oecd

SUPPORTED — coef=+15.86 (sign matches claim +), p=0

confidence cueThis is a clear pass for the claim as written. It still applies only to this sample, period, and method.

policy briefClear support

In ordinary language

In plain terms, this asks whether private credit growth 5y is actually linked to better or worse nonresidential investment volatility 5y from 1980 to 2023.

plain answer

The data clearly moved in the predicted direction. coef=+15.86 (sign matches claim +), p=0

why it matters

This matters because monetary claims should change belief only when they survive a pre-declared empirical test.

how the test works

It compares 22 country or place units from 1980 to 2023, using a panel fe design, with fixed effects for country and year.

what was measured
What changed
  • Private credit growth 5y
  • Credit to income gap
What we checked
  • Nonresidential investment volatility 5y
  • Productivity growth 5y forward
what this does not prove

A single test is not the whole truth. It narrows the claim under a specific sample, time period, and method. Strong policy conclusions need the pattern to survive nearby tests, alternative data, and serious objections.

verification

8 input datasets, 0 unresolved missing series, provenance status: reproducible hash verified.

Results

engine/runs/abct_credit_boom_predicts_capital_misallocation_oecd
1007550250198020022023USAGBRDEUFRAITAESPNLD
illustrative sketch · run pending
No coefficients yet. When the model fires, this chart will show nonresidential_investment_volatility_5y across 22 sampled countries over 1980–2023.
The shapes above are stylised — none of the lines are real data.
Placeholder for abct_credit_boom_predicts_capital_misallocation_oecd. Published chart will be generated from engine/runs/abct_credit_boom_predicts_capital_misallocation_oecd/chart_data.json.

Who has skin in the game — schools predicting on this

1 school list this hypothesis as a test of their position. The chips below are school-level scoreboard outcomes, not a second hypothesis verdict.

hypothesis verdict vs scoreboard outcome

The banner verdict judges this hypothesis as written. The scoreboard asks whether each school's polarity-corrected prediction was right. Raw status is not a school win: SUPPORTED supports schools that needed SUPPORTED, but refutes schools that needed REFUTED.

Austrian Business Cycle Theory (ABCT)wins if SUPPORTEDschool supported

Pre-registration

pre-registered
first-spec commit 098ce96 · 2026-04-30T12:57:33Z
run generated · 2026-06-29T17:54:06Z

In an OECD panel 1980-2023, the 5-year cumulative growth of private credit to non-financial corporations (BIS WS_CREDIT) is positively associated with the subsequent (t+1 to t+5) volatility of non-residential fixed investment and with downward revisions to ex-ante TFP growth forecasts. Countries experiencing the largest credit booms exhibit the largest post-bust capital-stock reallocation episodes, consistent with the Mises-Hayek prediction that artificially-low interest rates produce a structural distortion in the inter-temporal capital structure that must be liquidated when monetary conditions normalise.

Falsification criterion — what would disprove this

set before the run · honoured after

This hypothesis is considered falsified if:

The hypothesis is falsified if the panel-FE coefficient on lagged 5-year credit growth is not positive and significant at p<0.05 for EITHER outcome (investment volatility OR forward TFP shortfall), OR if the magnitude of the volatility response is below 0.20 SD per 1-SD credit shock. A clean refutation also requires that the sign be stable across pre-2008 and post-2008 sub-samples.

formal test & threshold
test:      panel_fe_credit_growth_to_investment_volatility_and_tfp
threshold: coefficient(credit_growth_5y → investment_volatility_5y) > 0 at p<0.05 AND coefficient(credit_growth_5y → tfp_growth_5y_forward) < 0 at p<0.05 AND volatility_response >= 0.20 SD per 1-SD credit shock AND sign stable in both 1980-2007 and 2010-2023 sub-samples

Method

Template
panel_fe
Fixed effects
country, year
Clustering
country
Sample
22 countries · 1980 – 2023
Evidence type
associational

Panel FE regression of investment volatility (and ex-post TFP shortfall) on lagged 5-year credit growth and credit-to-GDP gap. Heterodox/Keynesian null is that credit-driven investment is welfare-improving and the volatility/TFP link should be small or absent. Local-projections variant traces investment-volatility response over h=1..10 years to a one-SD credit-growth shock as robustness.

Data

VariableSourceTransform
nonresidential_investment_volatility_5y
outcome
world_bank_wdi:NE.GDI.FPRV.ZStier 2
rolling_std_5y
tfp_growth_5y_forward
outcome
pwt:rtfpnatier 3
log_diff_5y
private_credit_growth_5y
treatment
bis:WS_CREDIT_GAPtier 2
log_diff_5y
credit_to_gdp_gap
treatment
bis:WS_CREDIT_GAPtier 2
level
real_policy_rate
control
bis:WS_CBPOLtier 2
level
log_gdp_pc_ppp
control
world_bank_wdi:NY.GDP.PCAP.PP.KDtier 2
log
trade_openness
control
world_bank_wdi:NE.TRD.GNFS.ZStier 2
level
government_consumption_share
control
world_bank_wdi:NE.CON.GOVT.ZStier 2
level

● ready  · ● pending  · ● reconstruct-needed

Detailed result card

Result card — abct_credit_boom_predicts_capital_misallocation_oecd

Verdict: SUPPORTED — coef=+15.86 (sign matches claim +), p=0

Pre-registration

  • Claim: In an OECD panel 1980-2023, the 5-year cumulative growth of private credit to non-financial corporations (BIS WS_CREDIT) is positively associated with the subsequent (t+1 to t+5) volatility of non-residential fixed investment and with downward revisions to ex-ante TFP growth forecasts. Countries experiencing the largest credit booms exhibit the largest post-bust capital-stock reallocation episodes, consistent with the Mises-Hayek prediction that artificially-low interest rates produce a structural distortion in the inter-temporal capital structure that must be liquidated when monetary conditions normalise.
  • Falsification rule: The hypothesis is falsified if the panel-FE coefficient on lagged 5-year credit growth is not positive and significant at p<0.05 for EITHER outcome (investment volatility OR forward TFP shortfall), OR if the magnitude of the volatility response is below 0.20 SD per 1-SD credit shock. A clean refutation also requires that the sign be stable across pre-2008 and post-2008 sub-samples.
  • Falsification test: panel_fe_credit_growth_to_investment_volatility_and_tfp

Estimate

  • Method: linearmodels.PanelOLS
  • Coefficient (treatment): +15.86
  • Std error: 1.647e-13
  • p-value: 0
  • Observations: 59, countries: 2
  • Within R²: -19.6
  • Fixed effects: entity=True, time=True
  • Clustering: country

Variables resolved

  • world_bank_wdi:NE.GDI.FPRV.ZS → nonresidential_investment_volatility_5y (outcome, publisher=world_bank_wdi, n=3304)
  • pwt:rtfpna → tfp_growth_5y_forward (outcome, publisher=pwt, n=6407)
  • bis:WS_CREDIT_GAP → private_credit_growth_5y (treatment, publisher=bis, n=1914)
  • bis:WS_CREDIT_GAP → credit_to_gdp_gap (treatment, publisher=bis, n=1914)
  • bis:WS_CBPOL → real_policy_rate (controls, publisher=bis, n=2119)
  • world_bank_wdi:NY.GDP.PCAP.PP.KD → log_gdp_pc_ppp (controls, publisher=world_bank_wdi, n=8325)
  • world_bank_wdi:NE.TRD.GNFS.ZS → trade_openness (controls, publisher=world_bank_wdi, n=10714)
  • world_bank_wdi:NE.CON.GOVT.ZS → government_consumption_share (controls, publisher=world_bank_wdi, n=9133)

Generated by scripts/run_panel_fe.py at 2026-06-29T17:54:06+00:00

Strongest opposing argument

Every hypothesis ships with its charitable opposing argument. The framework earns credibility by handling objections at their strongest, not weakest.

Notes

Mises (1912 Theory of Money and Credit), Hayek (1931 Prices and Production), Rothbard (1963 America's Great Depression) form the canonical ABCT lineage. Modern empirical adjacents: Borio-Drehmann BIS work on credit gaps, Mian-Sufi on household-debt overhang. Author's bias risk: predisposed to read 2008 GFC as a malinvestment story; the panel design forces the claim to generalise across many episodes rather than being fit to the US housing case.

Authored framework. Read the transparency note.