IESET.
Hypotheses·monetary·abct_fed_funds_below_taylor_rule_capital_misallocation_2002_2007

Between 2002 and 2007 the US effective Federal Funds Rate ran on average more than 200 basis points below the rate prescribed by a standard Taylor rule (1.5 inflation-gap, 0.5 output-gap weights, 2% natural rate).

The 2008 housing bust and MBS write-downs constitute a canonical case of malinvestment in the inter-temporal capital structure: residential investment as a share of GDP rose 1.5 SD above its 1990-2001 mean, household mortgage debt rose by more than 40 percentage points of GDP, and the post-bust write-down of housing-sector capital exceeded $4 trillion. The Austrian interpretation — Greenspan-era loose money distorted the relative price of long-duration capital goods — is consistent with the multi-metric pattern of pre-bust extremes and post-bust collapse.

INCONCLUSIVEengine/runs/abct_fed_funds_below_taylor_rule_capital_misallocation_2002_2007

INCONCLUSIVE_DATA_PENDING — insufficient observations after listwise deletion (6)

confidence cueResult card produced; verdict unclassified.

policy briefCoverage too thin

In ordinary language

In plain terms, this asks whether fed funds rate is actually linked to better or worse residential investment share income from 1990 to 2012.

plain answer

This test cannot make a firm call yet. insufficient observations after listwise deletion (6)

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 1 country or place units from 1990 to 2012, using a multi metric checklist design.

what was measured
What changed
  • Fed funds rate
  • Taylor rule deviation
What we checked
  • Residential investment share income
  • Household mortgage debt to income
  • Case shiller home price index
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

No evidence packet has been generated yet.

Results

engine/runs/abct_fed_funds_below_taylor_rule_capital_misallocation_2002_2007
1007550250199020012012USA
illustrative sketch · run pending
No coefficients yet. When the model fires, this chart will show residential_investment_share_gdp across 1 sampled countries over 1990–2012.
The shapes above are stylised — none of the lines are real data.
Placeholder for abct_fed_funds_below_taylor_rule_capital_misallocation_2002_2007. Published chart will be generated from engine/runs/abct_fed_funds_below_taylor_rule_capital_misallocation_2002_2007/chart_data.json.

Pre-registration

pre-registered
first-spec commit 098ce96 · 2026-04-30T12:57:33Z
run generated · 2026-06-29T17:51:48Z

Between 2002 and 2007 the US effective Federal Funds Rate ran on average more than 200 basis points below the rate prescribed by a standard Taylor rule (1.5 inflation-gap, 0.5 output-gap weights, 2% natural rate). The 2008 housing bust and MBS write-downs constitute a canonical case of malinvestment in the inter-temporal capital structure: residential investment as a share of GDP rose 1.5 SD above its 1990-2001 mean, household mortgage debt rose by more than 40 percentage points of GDP, and the post-bust write-down of housing-sector capital exceeded $4 trillion. The Austrian interpretation — Greenspan-era loose money distorted the relative price of long-duration capital goods — is consistent with the multi-metric pattern of pre-bust extremes and post-bust collapse.

Falsification criterion — what would disprove this

set before the run · honoured after

This hypothesis is considered falsified if:

Hypothesis is supported if at least 4 of 5 canonical metrics meet their thresholds; refuted if fewer than 3 do. The "canonical" framing requires the pattern to be unambiguous in the data, not borderline.

formal test & threshold
test:      malinvestment_canonical_pattern_count
threshold: metrics_met >= 4 of 5 → supported metrics_met <= 2 of 5 → refuted

Method

Template
multi_metric_checklist
Sample
1 countries · 1990 – 2012
Evidence type
canonical_case_multi_metric

Pre-registered multi-metric pattern test: was the 2002-2007 window a canonical malinvestment episode? Each metric is independently sourced and would have to fail to justify rejecting the canonical case framing. Mainstream/Keynesian readers would attribute the bust to global savings-glut + financial-regulation gaps, not to Fed deviation from Taylor; the multi-metric checklist does not adjudicate between Austrian and savings-glut narratives, only whether the canonical pattern holds in the data.

Data

VariableSourceTransform
residential_investment_share_gdp
outcome
fred:PRFIC1tier 1
level
household_mortgage_debt_to_gdp
outcome
fred:HMLBSHNOtier 1
level
case_shiller_home_price_index
outcome
shiller:us_home_price_realtier 3
log
fed_funds_rate
treatment
fred:FEDFUNDStier 1
level
taylor_rule_deviation
treatment
constructed:FEDFUNDS minus standard Taylor rule (1.5 pi-gap, 0.5 y-gap, 2% r*, 2% pi*)tier 5
level
cpi_inflation
control
fred:CPIAUCSLtier 1
yoy
cbo_output_gap
control
fred:GDPC1tier 1
pct_dev_potential
long_term_yield_10y
control
fred:DGS10tier 1
level

● ready  · ● pending  · ● reconstruct-needed

Detailed result card

Result card — abct_fed_funds_below_taylor_rule_capital_misallocation_2002_2007

Verdict: INCONCLUSIVE_DATA_PENDING — insufficient observations after listwise deletion (6)

Pre-registration

  • Claim: Between 2002 and 2007 the US effective Federal Funds Rate ran on average more than 200 basis points below the rate prescribed by a standard Taylor rule (1.5 inflation-gap, 0.5 output-gap weights, 2% natural rate). The 2008 housing bust and MBS write-downs constitute a canonical case of malinvestment in the inter-temporal capital structure: residential investment as a share of GDP rose 1.5 SD above its 1990-2001 mean, household mortgage debt rose by more than 40 percentage points of GDP, and the post-bust write-down of housing-sector capital exceeded $4 trillion. The Austrian interpretation — Greenspan-era loose money distorted the relative price of long-duration capital goods — is consistent with the multi-metric pattern of pre-bust extremes and post-bust collapse.
  • Falsification rule: Hypothesis is supported if at least 4 of 5 canonical metrics meet their thresholds; refuted if fewer than 3 do. The "canonical" framing requires the pattern to be unambiguous in the data, not borderline.
  • Falsification test: malinvestment_canonical_pattern_count

Estimate

  • Error: insufficient observations after listwise deletion (6)

Variables resolved

  • fred:PRFIC1 → residential_investment_share_gdp (outcome, publisher=fred, n=19)
  • fred:HMLBSHNO → household_mortgage_debt_to_gdp (outcome, publisher=fred, n=81)
  • shiller:us_home_price_real → case_shiller_home_price_index (outcome, publisher=shiller, n=134)
  • fred:FEDFUNDS → fed_funds_rate (treatment, publisher=fred, n=73)
  • fred:CPIAUCSL → cpi_inflation (controls, publisher=fred, n=80)
  • fred:GDPC1 → cbo_output_gap (controls, publisher=fred, n=80)
  • fred:DGS10 → long_term_yield_10y (controls, publisher=fred, n=65)

Variables missing data

  • constructed: FEDFUNDS minus standard Taylor rule (1.5 pi-gap, 0.5 y-gap, 2% r*, 2% pi*) (treatment, name=taylor_rule_deviation) — vintage not on disk

Generated by scripts/run_panel_fe.py at 2026-06-29T17:51:48+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

Canonical Austrian case from Taylor (2007), Schwartz (2009), White (2009 "How Did We Get into This Mess?"). The hypothesis tests pattern, not mechanism — a Bernankean savings-glut account would also predict several of these metrics, so a "supported" verdict here does not uniquely confirm ABCT.

Authored framework. Read the transparency note.