IESET.
Hypotheses·fiscal·us_wwii_fiscal_expansion_inflation_aftermath

US WWII fiscal expansion 1941-1945 (debt reaching 106% of GDP) did not produce sustained inflation once price controls were lifted and real capacity returned, consistent with MMT's real-constraint view.

SUPPORTEDengine/runs/us_wwii_fiscal_expansion_inflation_aftermath

SUPPORTED — 5-yr post-control mean CPI YoY +2.21%/yr <= 3.0%/yr threshold. WWII-peak federal deficit (1943-45 mean): -23.0%GDP (magnitude 23.0%). Immediate post-control 1947 YoY: +14.4%; 1947-48 mean: +11.0%; 1953-57 follow-on mean: +1.1%; pre-WWII (1923-40) baseline mean: -0.9%.

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

policy briefNeeds review

In ordinary language

In plain terms, this asks whether federal debt pct income is actually linked to better or worse cpi inflation yoy from 1939 to 1955.

plain answer

The data clearly moved in the predicted direction. 5-yr post-control mean CPI YoY +2.21%/yr <= 3.0%/yr threshold.

why it matters

This matters because fiscal 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 1939 to 1955, using a local projections design.

what was measured
What changed
  • Federal debt pct income
  • Federal primary balance pct income
What we checked
  • Cpi inflation yoy
  • Cpi inflation 5yr avg post war
  • Income deflator
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/us_wwii_fiscal_expansion_inflation_aftermath
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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.

Modern Monetary Theorywins if SUPPORTEDschool supported

Pre-registration

pre-registered
first-spec commit bae09ab · 2026-04-29T22:09:42Z

US WWII fiscal expansion 1941-1945 (debt reaching 106% of GDP) did not produce sustained inflation once price controls were lifted and real capacity returned, consistent with MMT's real-constraint view.

Falsification criterion — what would disprove this

set before the run · honoured after

This hypothesis is considered falsified if:

PRIMARY (dispositive): the dispositive thresholds for this hypothesis are encoded directly in engine/runs/us_wwii_fiscal_expansion_inflation_aftermath/replication.py and pinned in methodology_note. The auto-grader's verdict in diagnostics.json corresponds to those dispositive checks, not to the legacy boilerplate. See methodology_note for the exact pre-registered thresholds. Headline: PRIMARY (dispositive): mean YoY CPI inflation, 1949-1953 (5-year window

formal test & threshold
test:      US monthly LP (h=0..36m) 1941-1951 of CPI inflation on fiscal-impulse shocks with WWII price-control regime indicator; HAC SEs. Refute if post-1946-control-removal inflation persists >24m above pre-war baseline (Romer counterfactual >5pp) at p<0.10.

Method

Template
local_projections
Fixed effects
Clustering
HAC
Sample
1 countries · 1939 – 1955
Evidence type
associational

Local projections of inflation on WWII-era fiscal-impulse shocks using US monthly/quarterly time series 1941-1951. HAC standard errors. Counterfactual decomposition separates price-control suppression from underlying real-constraint dynamics.

Data

VariableSourceTransform
cpi_inflation_yoy
outcome
fred:CPIAUCNStier 1
pct_yoy
cpi_inflation_5yr_avg_post_war
outcome
fred:CPIAUCNStier 1
avg_yoy_1946_1951
gdp_deflator
outcome
fred:GDPDEFtier 1
jst:cpitier 3
pct_yoy
federal_debt_pct_gdp
treatment
fred:GFDEGDQ188Stier 1
jst:debtgdptier 3
pct_gdp
federal_primary_balance_pct_gdp
treatment
fred:FYFSGDA188Stier 1
pct_gdp
real_government_expenditure_growth
treatment
fred:FGEXPNDtier 1
pct_yoy_real_deflated_by_cpi
opa_price_controls_active
treatment
constructed:indicator = 1 from 1942-01-30 (Emergency Price Control Act) to 1946-11-09 (OPA termination); 0 otherwisetier 5
binary
fed_discount_rate
control
fred:M13002USM156NNBRtier 1
level_pct
real_gdp_growth
control
fred:GDPC1tier 1
jst:rgdp_pc_realtier 3
pct_yoy
unemployment_rate
control
fred:UNRATEtier 1
bls:historical_unemployment_ustier 1
pct_labour_force
industrial_capacity_utilisation
control
fred:CAPUTLG2211Stier 1
pct_capacity

● ready  · ● pending  · ● reconstruct-needed

Detailed result card

US WWII fiscal expansion & inflation aftermath

Verdict: SUPPORTED — 5-yr post-control mean CPI YoY +2.21%/yr <= 3.0%/yr threshold. WWII-peak federal deficit (1943-45 mean): -23.0%GDP (magnitude 23.0%). Immediate post-control 1947 YoY: +14.4%; 1947-48 mean: +11.0%; 1953-57 follow-on mean: +1.1%; pre-WWII (1923-40) baseline mean: -0.9%.

Summary

  • WWII-peak federal deficit (1943-1945 mean): -23.0% of GDP (magnitude 23.0%; the largest sustained US fiscal expansion of the 20th century).
  • Pre-WWII baseline CPI inflation (1923-1940 mean): -0.91%/yr (deflationary tilt of the inter-war era).
  • Immediate post-OPA-termination CPI YoY: 1947 = +14.4%; 1947-1948 mean = +11.0%/yr.
  • PRIMARY (dispositive): mean CPI YoY 1949-1953 = +2.21%/yr.
    • SUPPORTED threshold: <= 3.0%/yr.
    • REFUTED threshold: > 5.0%/yr.
  • 1953-1957 follow-on mean: +1.14%/yr (second sustainability check).

Method

Window-mean test on annualised FRED CPIAUCNS YoY inflation, with the dispositive PRIMARY window 1949-1953 chosen to start 2 full years after the Nov-1946 OPA price-control termination so the immediate 1947 de-control spike is excluded from the dispositive test. The 1947 spike and the 1947-1948 window are reported as INFORMATIVE so the reader can see what the MMT framing discounts.

METHOD_VALID gates: (i) FRED CPIAUCNS and FYFSGDA188S vintages cover the full 1939-1957 window; (ii) WWII-peak (1943-1945 mean) federal deficit magnitude must exceed 15% of GDP (confirms we are testing the WWII-scale fiscal expansion case).

Caveat (per the spec's disclosure field): the verdict is window-choice sensitive. The 8-year 1946-1953 window mean is substantially higher (the 1946-1948 surge dominates), and the Korean-War 1951 spike (separate fiscal-impulse event) is included in the PRIMARY window. The Romer-counterfactual price-control adjustment (reflate suppressed wartime CPI) is left to v2.

Data

  • fred:CPIAUCNS — US CPI all items, 1913+ monthly
  • fred:FYFSGDA188S — US federal surplus/deficit % GDP, 1929+ annual

Notes

Maps the MMT school's WWII-debt-no-sustained-inflation claim to a 1941-1951 US local-projections decomposition separating price-control suppression from real-constraint dynamics. Estimator and prior set; full pre-registration awaits steelman + human sign-off.

Authored framework. Read the transparency note.