Paul Krugman responded to my reply (March 31) to his two critiques (afternoon and eveningof March 30) of my post (January 14) on the negative correlation between investment and unemployment. He now says that Taylor “professes himself baffled.” Of course I didn’t profess any such thing. I simply showed that Krugman was wrong.
That is John Taylor in the latest update in a series of back-and-forth posts on the relationship between investment and unemployment. The posts are worth reading. In addition, check out this post by Hashmat Khan on this same relationship and some evidence on which way causality is running.