tag:blogger.com,1999:blog-1513588060557517621.post2093745994058501925..comments2023-03-22T12:40:49.113+01:00Comments on Notes on the Next Bust: A Comparison of the Long Term Effects of Private Sector vs Public Sector DebtAri Andricopouloshttp://www.blogger.com/profile/00181838814176635218noreply@blogger.comBlogger5125tag:blogger.com,1999:blog-1513588060557517621.post-58870853776448886762015-04-15T15:04:51.189+02:002015-04-15T15:04:51.189+02:00Thanks for the comment Suvy.
The data is slightly...Thanks for the comment Suvy.<br /><br />The data is slightly fat tailed (3.4 degrees of freedom on a t-location scale distribution) but I wouldn't say that it is enough to make linear regression inapplicable. <br /><br />However, I have run a robust fit and it comes up with the following coefficients:<br /><br />Mpriv = 10.1%<br />LTCpriv = -1.56%<br />LTCgov = -0.74%<br /><br />All are within the standard error of the least squares regression.<br /><br />But actually makes things look slightly worse for private sector debt relative to public sector debt!Ari Andricopouloshttps://www.blogger.com/profile/00181838814176635218noreply@blogger.comtag:blogger.com,1999:blog-1513588060557517621.post-80551451334359528832015-04-15T14:32:38.854+02:002015-04-15T14:32:38.854+02:00Linear regression isn't applicable here. Clear...Linear regression isn't applicable here. Clearly, the data isn't homoskedastic and the errors seem to be correlated (pull up a plot of the residuals if you don't believe me). I'm pretty sure this data is fat-tailed.Suvy Boyinahttps://www.blogger.com/profile/14498944095362886178noreply@blogger.comtag:blogger.com,1999:blog-1513588060557517621.post-82779135965115941192015-04-14T17:03:14.732+02:002015-04-14T17:03:14.732+02:00"Drag caused by the payment of interest."..."Drag caused by the payment of interest." You just hit the nail on the head sir.<br />Great post!!Reynmakerhttps://www.blogger.com/profile/07476475937171799011noreply@blogger.comtag:blogger.com,1999:blog-1513588060557517621.post-67463437081410175772015-04-14T16:58:27.445+02:002015-04-14T16:58:27.445+02:00Thanks! I suppose, if the definition of a balance ...Thanks! I suppose, if the definition of a balance sheet recession is that it is the paying down of debt that causes the recession, then the difference is that this is a drag on growth whether or not people are reducing their debt. <br /><br />The drag is caused by the payment of interest from those with a high propensity to spend to those with a low propensity to spend, and also because of the financial instability. Ari Andricopouloshttps://www.blogger.com/profile/00181838814176635218noreply@blogger.comtag:blogger.com,1999:blog-1513588060557517621.post-90744774453075457132015-04-14T16:51:28.697+02:002015-04-14T16:51:28.697+02:00Excellent post. My only questions is how does this...Excellent post. My only questions is how does this differ from a Balance Sheet Recession? Reynmakerhttps://www.blogger.com/profile/07476475937171799011noreply@blogger.com