News & AnalysisNobel Memorial Prize in Economic Sciences

Teasing Out Cause and Effect in Macroeconomics

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Science  14 Oct 2011:
Vol. 334, Issue 6053, pp. 164
DOI: 10.1126/science.334.6053.164

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Summary

Did the U.S. government's decision to keep interest rates down lead to increased home buying in the United States in the middle of the past decade? Or did the boom in the housing market during those years result from people's expectations that the government would not raise interest rates? Sorting out such tangles of cause and effect in the world of macroeconomics is a messy business. But if you do it well, you might win a Nobel Prize in economics—as Christopher Sims and Thomas Sargent have done.