Re:Is growth in the financial sector good for the economy?
by yummyfajitas on Monday July 20, 2015 @09:03AM
(#9915694)
It's a bit unclear to me how the authors establish the direction of causality. Isn't it an equally valid interpretation that low productivity industries with lots of collateral cause the financial sector to grow?
The reason is that if you try to fit a quadratic regression to an S-curve, you'll come up with a downward sloping parabola (if the data points live near the right side of the S, if they live near the left you'll get an upward sloping one). That's simply a limitation of quadratic regression. Oops.
The one paper they cite which isn't paywalled uses a rather flawed methodology: http://www.bis.org/publ/work381.pdf
The same methodology also shows that too many doctors, telephones and or R&D technicians inhibits growth: http://www.iie.com/publications/pb/pb15-9.pdf
The reason is that if you try to fit a quadratic regression to an S-curve, you'll come up with a downward sloping parabola (if the data points live near the right side of the S, if they live near the left you'll get an upward sloping one). That's simply a limitation of quadratic regression. Oops.