A Fractal Comparison of Real and Austrian Business Cycle Models

This paper examines macromonetary data for fractal character and stochastic dependence. Lo's modified R/S test for stochastic dependence is used to explore the data's fractal properties along with five fractal analysis techniques for estimating the Hurst exponent, Mandelbrot-Leacute;vy characteristic exponent, and fractal dimension. Techniques employed are rescaled-range analysis, power-spectral density analysis, roughness-length analysis, the variogram or structure function method, and wavelet analysis. Monthly data is analyzed over the 1959-2006 range and a quarterly dataset extending from 1947-2006 is also examined. Strong evidence is found for stochastic dependence in the monetary aggregates, which suggests an activist monetary policy, and for nominal consumption expenditures, supporting Austrian business cycle theory. No evidence for stochastic dependence in investment productivity is found, and this finding is invariant to whether productivity ratios are adjusted to account for credit expansion