[Script Info]
Title: 
[Events]
Format: Layer, Start, End, Style, Name, MarginL, MarginR, MarginV, Effect, Text
Dialogue: 0,0:00:00.40,0:00:03.05,Default,,0000,0000,0000,,- [woman] The path\Nfrom cause to effect
Dialogue: 0,0:00:03.05,0:00:05.54,Default,,0000,0000,0000,,is dark and dangerous,
Dialogue: 0,0:00:05.54,0:00:08.90,Default,,0000,0000,0000,,but the weapons\Nof econometrics are strong,
Dialogue: 0,0:00:09.21,0:00:13.70,Default,,0000,0000,0000,,wield differences-in-differences\Nwhen witnessing parallel trends.
Dialogue: 0,0:00:14.45,0:00:16.85,Default,,0000,0000,0000,,♪ [music] ♪
Dialogue: 0,0:00:20.10,0:00:21.42,Default,,0000,0000,0000,,Masters of metrics
Dialogue: 0,0:00:21.42,0:00:24.80,Default,,0000,0000,0000,,look for convincing\Nceteris paribus comparisons.
Dialogue: 0,0:00:25.10,0:00:29.42,Default,,0000,0000,0000,,The ideal comparison contrasts\Ntreatment and control groups
Dialogue: 0,0:00:29.42,0:00:30.60,Default,,0000,0000,0000,,that look similar.
Dialogue: 0,0:00:30.60,0:00:34.70,Default,,0000,0000,0000,,But sometimes this sort\Nof comparability is elusive.
Dialogue: 0,0:00:34.70,0:00:36.80,Default,,0000,0000,0000,,When treatment and control groups
Dialogue: 0,0:00:36.80,0:00:40.10,Default,,0000,0000,0000,,evolve similarly\Nin the absence of treatment,
Dialogue: 0,0:00:40.10,0:00:42.31,Default,,0000,0000,0000,,even if from different\Nstarting points,
Dialogue: 0,0:00:42.31,0:00:44.90,Default,,0000,0000,0000,,there's hope for causal inference.
Dialogue: 0,0:00:45.60,0:00:48.40,Default,,0000,0000,0000,,The weapon that exploits\Nparallel evolution,
Dialogue: 0,0:00:48.66,0:00:50.89,Default,,0000,0000,0000,,masters say parallel trends,
Dialogue: 0,0:00:50.89,0:00:53.27,Default,,0000,0000,0000,,is called differences-in-differences...
Dialogue: 0,0:00:53.27,0:00:54.40,Default,,0000,0000,0000,,- [Man whispering]\NDifferences-in-differences
Dialogue: 0,0:00:54.40,0:00:56.90,Default,,0000,0000,0000,,- ...or DD for short.\N- [Man] Alright.
Dialogue: 0,0:00:56.90,0:00:59.99,Default,,0000,0000,0000,,Let's see how DD\Ncan help us understand
Dialogue: 0,0:00:59.99,0:01:02.89,Default,,0000,0000,0000,,one of the most important\Neconomic events
Dialogue: 0,0:01:02.89,0:01:04.37,Default,,0000,0000,0000,,in US history.
Dialogue: 0,0:01:05.30,0:01:08.30,Default,,0000,0000,0000,,- [Joshua] Look back with me now\Nat the Great Depression --
Dialogue: 0,0:01:08.80,0:01:12.20,Default,,0000,0000,0000,,the worst economic catastrophe\Nour country has ever known.
Dialogue: 0,0:01:13.10,0:01:16.20,Default,,0000,0000,0000,,Unemployment hit 25% in 1933 --
Dialogue: 0,0:01:16.60,0:01:19.11,Default,,0000,0000,0000,,a level not seen before or since.
Dialogue: 0,0:01:19.47,0:01:22.10,Default,,0000,0000,0000,,Millions lost their homes\Nor their land.
Dialogue: 0,0:01:22.60,0:01:24.74,Default,,0000,0000,0000,,Suicide spiked, and hungry families
Dialogue: 0,0:01:24.74,0:01:26.77,Default,,0000,0000,0000,,relied on soup kitchens\Nand bread lines
Dialogue: 0,0:01:26.77,0:01:28.16,Default,,0000,0000,0000,,to keep from starving.
Dialogue: 0,0:01:29.40,0:01:34.00,Default,,0000,0000,0000,,- Economists argue fiercely over\Nthe causes of the Great Depression.
Dialogue: 0,0:01:34.00,0:01:36.98,Default,,0000,0000,0000,,Most agree, however,\Nthat a key piece of the puzzle
Dialogue: 0,0:01:36.98,0:01:39.46,Default,,0000,0000,0000,,is an epidemic of bank failures.
Dialogue: 0,0:01:39.80,0:01:41.90,Default,,0000,0000,0000,,This was before deposit insurance.
Dialogue: 0,0:01:42.10,0:01:46.55,Default,,0000,0000,0000,,So if your bank went bankrupt,\Nyour savings disappeared with it.
Dialogue: 0,0:01:46.55,0:01:47.67,Default,,0000,0000,0000,,- [Cashier] Closing your account?
Dialogue: 0,0:01:47.67,0:01:48.89,Default,,0000,0000,0000,,- [Customer] Yes, sir.\NI'm closing my account.
Dialogue: 0,0:01:48.89,0:01:50.73,Default,,0000,0000,0000,,- I wouldn't leave a nickel\Nin this bank.
Dialogue: 0,0:01:52.60,0:01:56.10,Default,,0000,0000,0000,,- Faced with a banking crisis,\Nthe Central Bank has a choice:
Dialogue: 0,0:01:56.40,0:01:58.52,Default,,0000,0000,0000,,lend freely to troubled banks
Dialogue: 0,0:01:58.52,0:02:01.10,Default,,0000,0000,0000,,or stand aside and refuse to lend.
Dialogue: 0,0:02:01.50,0:02:05.44,Default,,0000,0000,0000,,Lending freely to banks in trouble\Nis called "easy money."
Dialogue: 0,0:02:05.44,0:02:08.10,Default,,0000,0000,0000,,Refusing to lend\Nis called "tight money."
Dialogue: 0,0:02:10.20,0:02:12.87,Default,,0000,0000,0000,,- [Joshua] Monetarist masters\NMilton Friedman and Anna Schwartz
Dialogue: 0,0:02:12.87,0:02:14.88,Default,,0000,0000,0000,,famously called\Nthe Great Depression
Dialogue: 0,0:02:14.88,0:02:16.35,Default,,0000,0000,0000,,the "Great Contraction,"
Dialogue: 0,0:02:16.80,0:02:18.26,Default,,0000,0000,0000,,accusing the Federal Reserve
Dialogue: 0,0:02:18.26,0:02:21.20,Default,,0000,0000,0000,,of inflicting a misguided policy\Nof tight money
Dialogue: 0,0:02:21.20,0:02:24.00,Default,,0000,0000,0000,,on the nation's teetering\Nfinancial institutions.
Dialogue: 0,0:02:24.40,0:02:25.87,Default,,0000,0000,0000,,They argued that easy money
Dialogue: 0,0:02:25.87,0:02:27.98,Default,,0000,0000,0000,,would have kept\Nmany banks in business,
Dialogue: 0,0:02:27.98,0:02:29.70,Default,,0000,0000,0000,,shortening the Great Depression.
Dialogue: 0,0:02:30.40,0:02:32.24,Default,,0000,0000,0000,,But others disagree!
Dialogue: 0,0:02:32.24,0:02:33.77,Default,,0000,0000,0000,,If banks are insolvent
Dialogue: 0,0:02:33.77,0:02:35.95,Default,,0000,0000,0000,,because of unwise\Nlending decisions,
Dialogue: 0,0:02:35.95,0:02:38.90,Default,,0000,0000,0000,,then bailouts just encourage\Nmore foolishness.
Dialogue: 0,0:02:39.60,0:02:42.96,Default,,0000,0000,0000,,Economists called this problem\N"moral hazard."
Dialogue: 0,0:02:42.96,0:02:46.10,Default,,0000,0000,0000,,The debate over bailouts\Nin moral hazard continues today.
Dialogue: 0,0:02:46.50,0:02:48.60,Default,,0000,0000,0000,,Should financial behemoth\NLehman Brothers
Dialogue: 0,0:02:48.60,0:02:51.50,Default,,0000,0000,0000,,had been allowed to fail\Non the eve of the Great Recession,
Dialogue: 0,0:02:52.00,0:02:54.70,Default,,0000,0000,0000,,in an ideal world,\Nwe'd answer this question
Dialogue: 0,0:02:54.70,0:02:58.40,Default,,0000,0000,0000,,by applying different Fed policies\Nto randomly selected regions.
Dialogue: 0,0:02:59.00,0:03:00.25,Default,,0000,0000,0000,,But we can still learn a lot
Dialogue: 0,0:03:00.25,0:03:02.12,Default,,0000,0000,0000,,by using differences-in-differences
Dialogue: 0,0:03:02.12,0:03:06.30,Default,,0000,0000,0000,,to compare trends across areas\Nwith different monetary policies.
Dialogue: 0,0:03:10.90,0:03:12.52,Default,,0000,0000,0000,,How's that even possible?
Dialogue: 0,0:03:12.52,0:03:15.78,Default,,0000,0000,0000,,Don't the same Fed policies\Napply to all banks in the US?
Dialogue: 0,0:03:15.78,0:03:17.40,Default,,0000,0000,0000,,- Yeah.\N- Good question.
Dialogue: 0,0:03:17.70,0:03:21.48,Default,,0000,0000,0000,,The Federal Reserve System\Nis divided into 12 districts,
Dialogue: 0,0:03:21.48,0:03:24.30,Default,,0000,0000,0000,,each headed by a regional bank.
Dialogue: 0,0:03:24.30,0:03:27.47,Default,,0000,0000,0000,,Today, Fed policy is set\Nat the national level.
Dialogue: 0,0:03:27.47,0:03:32.20,Default,,0000,0000,0000,,But in the 1930s, regional Feds\Ncould do pretty much as they liked.
Dialogue: 0,0:03:32.20,0:03:33.28,Default,,0000,0000,0000,,Ah, interesting.
Dialogue: 0,0:03:33.28,0:03:35.50,Default,,0000,0000,0000,,And here's what's\Nso awesome about that.
Dialogue: 0,0:03:35.50,0:03:39.30,Default,,0000,0000,0000,,In 1930, the Atlanta Fed,\Nrunning the 6th District,
Dialogue: 0,0:03:39.30,0:03:41.47,Default,,0000,0000,0000,,followed an easy money policy,
Dialogue: 0,0:03:41.47,0:03:45.40,Default,,0000,0000,0000,,sending wheelbarrows of cash\Nto rescue insolvent institutions,
Dialogue: 0,0:03:45.90,0:03:48.82,Default,,0000,0000,0000,,The St. Louis Fed,\Nrunning the 8th District,
Dialogue: 0,0:03:48.82,0:03:50.67,Default,,0000,0000,0000,,followed a tight money policy.
Dialogue: 0,0:03:51.10,0:03:53.90,Default,,0000,0000,0000,,"Let fail the foolish!"\Nthey said in St. Louis.
Dialogue: 0,0:03:54.30,0:03:58.70,Default,,0000,0000,0000,,And so a natural experiment\Nin monetary policy was born.
Dialogue: 0,0:03:58.70,0:04:02.00,Default,,0000,0000,0000,,Even better, this is\Na within-state experiment.
Dialogue: 0,0:04:02.00,0:04:04.35,Default,,0000,0000,0000,,The border between the 6th\Nand the 8th districts
Dialogue: 0,0:04:04.35,0:04:06.76,Default,,0000,0000,0000,,ran smack through\Nthe middle of Mississippi.
Dialogue: 0,0:04:07.30,0:04:09.32,Default,,0000,0000,0000,,So northern Mississippi\Nhad tight money,
Dialogue: 0,0:04:09.32,0:04:11.87,Default,,0000,0000,0000,,while southern Mississippi\Nhad easy money,
Dialogue: 0,0:04:11.87,0:04:15.20,Default,,0000,0000,0000,,but under the same state laws\Nin banking regulations in both.
Dialogue: 0,0:04:15.77,0:04:16.85,Default,,0000,0000,0000,,The treatment group
Dialogue: 0,0:04:16.85,0:04:20.15,Default,,0000,0000,0000,,is the District 6th part\Nof Mississippi,
Dialogue: 0,0:04:20.15,0:04:23.10,Default,,0000,0000,0000,,which had access to easy money\Nduring the crisis.
Dialogue: 0,0:04:23.80,0:04:25.09,Default,,0000,0000,0000,,The control group
Dialogue: 0,0:04:25.09,0:04:27.80,Default,,0000,0000,0000,,is the District 8th part\Nof Mississippi,
Dialogue: 0,0:04:27.80,0:04:30.22,Default,,0000,0000,0000,,which had tight money\Nduring the crisis.
Dialogue: 0,0:04:31.30,0:04:34.04,Default,,0000,0000,0000,,The key year\Nin our natural experiment
Dialogue: 0,0:04:34.04,0:04:35.40,Default,,0000,0000,0000,,was 1930,
Dialogue: 0,0:04:35.80,0:04:37.56,Default,,0000,0000,0000,,Caldwell & Company,
Dialogue: 0,0:04:37.56,0:04:40.38,Default,,0000,0000,0000,,a massive financial empire\Nin the South
Dialogue: 0,0:04:40.38,0:04:41.99,Default,,0000,0000,0000,,came crashing down.
Dialogue: 0,0:04:42.70,0:04:46.00,Default,,0000,0000,0000,,Banking is a business\Nbuilt on confidence and trust.
Dialogue: 0,0:04:46.50,0:04:49.15,Default,,0000,0000,0000,,The Caldwell meltdown\Ncaused a panic
Dialogue: 0,0:04:49.15,0:04:53.05,Default,,0000,0000,0000,,that led to a widespread\Nbank run all at once.
Dialogue: 0,0:04:53.05,0:04:55.11,Default,,0000,0000,0000,,Depositors wanted their money back,
Dialogue: 0,0:04:55.11,0:04:58.20,Default,,0000,0000,0000,,causing banks to go bankrupt\Nand shut their doors.
Dialogue: 0,0:05:01.00,0:05:03.32,Default,,0000,0000,0000,,We'll use differences-in-differences
Dialogue: 0,0:05:03.32,0:05:06.61,Default,,0000,0000,0000,,to measure the effect\Nof contrasting monetary policies
Dialogue: 0,0:05:06.61,0:05:09.16,Default,,0000,0000,0000,,in response to the Caldwell crisis.
Dialogue: 0,0:05:12.50,0:05:16.44,Default,,0000,0000,0000,,This figure plots the number\Nof banks in Mississippi by year,
Dialogue: 0,0:05:16.44,0:05:19.27,Default,,0000,0000,0000,,for the 8th and 6th districts.
Dialogue: 0,0:05:19.27,0:05:24.20,Default,,0000,0000,0000,,Let's start in 1929 -- a year\Nbefore the Caldwell crash.
Dialogue: 0,0:05:24.20,0:05:27.65,Default,,0000,0000,0000,,There are 169 banks\Nopen in the 8th,
Dialogue: 0,0:05:27.65,0:05:31.37,Default,,0000,0000,0000,,and 141 banks open in the 6th.
Dialogue: 0,0:05:31.37,0:05:32.78,Default,,0000,0000,0000,,Over the next year,
Dialogue: 0,0:05:32.78,0:05:37.00,Default,,0000,0000,0000,,we see a similar handful\Nof banks fail, in both districts.
Dialogue: 0,0:05:37.40,0:05:40.14,Default,,0000,0000,0000,,The change in the number\Nof banks in operation
Dialogue: 0,0:05:40.14,0:05:42.17,Default,,0000,0000,0000,,is remarkably similar.
Dialogue: 0,0:05:42.17,0:05:44.60,Default,,0000,0000,0000,,That's what parallel trends look like.
Dialogue: 0,0:05:45.50,0:05:48.78,Default,,0000,0000,0000,,In November 1930, Caldwell crashes,
Dialogue: 0,0:05:48.78,0:05:50.40,Default,,0000,0000,0000,,and the panic begins.
Dialogue: 0,0:05:51.20,0:05:53.92,Default,,0000,0000,0000,,Banks failed frequently\Nin the 8th district,
Dialogue: 0,0:05:53.92,0:05:55.30,Default,,0000,0000,0000,,which had tight money.
Dialogue: 0,0:05:55.80,0:05:58.71,Default,,0000,0000,0000,,But the decline is slower\Nin the 6th District,
Dialogue: 0,0:05:58.71,0:06:00.25,Default,,0000,0000,0000,,which had easy money.
Dialogue: 0,0:06:00.80,0:06:03.00,Default,,0000,0000,0000,,The diverging trends in this period
Dialogue: 0,0:06:03.00,0:06:06.60,Default,,0000,0000,0000,,might be attributable\Nto easy versus tight money.
Dialogue: 0,0:06:06.60,0:06:12.02,Default,,0000,0000,0000,,In July of 1931, the 8th district\Nabandons tight money,
Dialogue: 0,0:06:12.02,0:06:14.42,Default,,0000,0000,0000,,so now both districts are easy.
Dialogue: 0,0:06:14.70,0:06:16.90,Default,,0000,0000,0000,,Parallel trends are restored.
Dialogue: 0,0:06:17.30,0:06:19.23,Default,,0000,0000,0000,,In a counterfactual world,
Dialogue: 0,0:06:19.23,0:06:22.42,Default,,0000,0000,0000,,where the 6th district\Nfollows a tight money policy,
Dialogue: 0,0:06:22.42,0:06:23.80,Default,,0000,0000,0000,,what might have happened?
Dialogue: 0,0:06:24.20,0:06:28.55,Default,,0000,0000,0000,,If we extrapolate the trend\Nof the 8th district to the 6th,
Dialogue: 0,0:06:28.55,0:06:29.90,Default,,0000,0000,0000,,it would look like this.
Dialogue: 0,0:06:30.29,0:06:33.10,Default,,0000,0000,0000,,So the treatment effective\Neasy money
Dialogue: 0,0:06:33.10,0:06:36.65,Default,,0000,0000,0000,,is how much the 6th district\Ndeviated from the path
Dialogue: 0,0:06:36.65,0:06:38.90,Default,,0000,0000,0000,,implied by the 8th district trend.
Dialogue: 0,0:06:41.24,0:06:44.48,Default,,0000,0000,0000,,How many banks\Ndid the easy money treatment save?
Dialogue: 0,0:06:44.48,0:06:49.02,Default,,0000,0000,0000,,This table reports data\Nfor the treatment group, District 6,
Dialogue: 0,0:06:49.02,0:06:50.16,Default,,0000,0000,0000,,in the first row
Dialogue: 0,0:06:50.16,0:06:54.24,Default,,0000,0000,0000,,and data for the control group,\NDistrict 8, in the second row.
Dialogue: 0,0:06:54.24,0:06:57.49,Default,,0000,0000,0000,,The first column shows\Nthe number of banks in business
Dialogue: 0,0:06:57.49,0:07:00.61,Default,,0000,0000,0000,,before the crisis began in 1930.
Dialogue: 0,0:07:00.61,0:07:03.98,Default,,0000,0000,0000,,The second column shows 1931.
Dialogue: 0,0:07:03.98,0:07:05.61,Default,,0000,0000,0000,,This is the key period
Dialogue: 0,0:07:05.61,0:07:08.66,Default,,0000,0000,0000,,when each district\Nhad differing monetary policies
Dialogue: 0,0:07:08.66,0:07:10.24,Default,,0000,0000,0000,,during the crisis.
Dialogue: 0,0:07:10.24,0:07:14.35,Default,,0000,0000,0000,,The rightmost column\Nreports changes within the district.
Dialogue: 0,0:07:14.35,0:07:20.46,Default,,0000,0000,0000,,District 6 lost 14 banks,\Nwhile District 8 lost 33.
Dialogue: 0,0:07:20.46,0:07:23.97,Default,,0000,0000,0000,,The mathematical formula\Nfor the treatment effect is simple.
Dialogue: 0,0:07:24.40,0:07:28.70,Default,,0000,0000,0000,,We subtract the change in banks\Nin operation, in the 8th District,
Dialogue: 0,0:07:28.90,0:07:32.20,Default,,0000,0000,0000,,from the change in banks\Nin operation in the 6th.
Dialogue: 0,0:07:32.80,0:07:35.70,Default,,0000,0000,0000,,Hence, the name\Ndifferences-in-differences.
Dialogue: 0,0:07:37.00,0:07:42.50,Default,,0000,0000,0000,,-14 minus -33 equals 19.
Dialogue: 0,0:07:42.50,0:07:46.80,Default,,0000,0000,0000,,We estimate that 19 banks\Nwere saved by easy money.
Dialogue: 0,0:07:47.30,0:07:50.73,Default,,0000,0000,0000,,In practice, tables and figures\Nlike those shown here
Dialogue: 0,0:07:50.73,0:07:52.91,Default,,0000,0000,0000,,are the beginning\Nrather than the end
Dialogue: 0,0:07:52.91,0:07:54.45,Default,,0000,0000,0000,,of a DD analysis,
Dialogue: 0,0:07:55.40,0:07:57.10,Default,,0000,0000,0000,,The problem of how to gauge
Dialogue: 0,0:07:57.10,0:08:00.17,Default,,0000,0000,0000,,the statistical significance\Nof DD estimates
Dialogue: 0,0:08:00.17,0:08:02.39,Default,,0000,0000,0000,,turns out to be exceedingly tricky,
Dialogue: 0,0:08:02.40,0:08:05.60,Default,,0000,0000,0000,,and a regression is typically\Npart of the solution.
Dialogue: 0,0:08:09.20,0:08:12.34,Default,,0000,0000,0000,,The key assumption\Nbehind a valid DD analysis
Dialogue: 0,0:08:12.34,0:08:15.37,Default,,0000,0000,0000,,is that of parallel trends.
Dialogue: 0,0:08:15.37,0:08:17.84,Default,,0000,0000,0000,,Recall the principle\Nof ceteris paribus --
Dialogue: 0,0:08:17.84,0:08:21.70,Default,,0000,0000,0000,,our ideal comparison would have\Nthe two districts experience
Dialogue: 0,0:08:21.70,0:08:24.02,Default,,0000,0000,0000,,and identical business environment,
Dialogue: 0,0:08:24.02,0:08:25.100,Default,,0000,0000,0000,,except for one factor:
Dialogue: 0,0:08:25.100,0:08:27.92,Default,,0000,0000,0000,,easy or tight money.
Dialogue: 0,0:08:29.20,0:08:32.48,Default,,0000,0000,0000,,Both districts would have\Nidentical types of customers
Dialogue: 0,0:08:32.48,0:08:35.30,Default,,0000,0000,0000,,who would go bankrupt\Nat exactly the same rate.
Dialogue: 0,0:08:35.70,0:08:38.60,Default,,0000,0000,0000,,The skill of their employees\Nwould be equal, and so on.
Dialogue: 0,0:08:39.20,0:08:43.40,Default,,0000,0000,0000,,Perfect ceteris paribus comparisons\Nwould allow us to clearly see
Dialogue: 0,0:08:43.60,0:08:46.59,Default,,0000,0000,0000,,the causal effect\Nof different Fed policies.
Dialogue: 0,0:08:46.59,0:08:49.02,Default,,0000,0000,0000,,In this case, that's not possible.
Dialogue: 0,0:08:49.02,0:08:53.60,Default,,0000,0000,0000,,But the idea of parallel trends\Nis based on a similar concept.
Dialogue: 0,0:08:53.60,0:08:57.36,Default,,0000,0000,0000,,If we see that the two regions\Nexperienced similar trends
Dialogue: 0,0:08:57.36,0:08:59.81,Default,,0000,0000,0000,,in the number of banks over time,
Dialogue: 0,0:08:59.81,0:09:01.29,Default,,0000,0000,0000,,in the absence of treatment,
Dialogue: 0,0:09:01.29,0:09:04.41,Default,,0000,0000,0000,,we can assume\Nthey are good comparisons.
Dialogue: 0,0:09:04.41,0:09:07.43,Default,,0000,0000,0000,,We see that the two districts\Nmove in parallel,
Dialogue: 0,0:09:07.43,0:09:09.80,Default,,0000,0000,0000,,both before the crisis and after.
Dialogue: 0,0:09:10.10,0:09:12.40,Default,,0000,0000,0000,,when they have the same Fed policy.
Dialogue: 0,0:09:13.10,0:09:16.03,Default,,0000,0000,0000,,The only time the districts\Nbehaved differently
Dialogue: 0,0:09:16.03,0:09:18.30,Default,,0000,0000,0000,,is when the Fed policy is different.
Dialogue: 0,0:09:19.40,0:09:20.60,Default,,0000,0000,0000,,In view of this,
Dialogue: 0,0:09:20.60,0:09:24.27,Default,,0000,0000,0000,,Fed policy is a likely cause\Nof diverging trends
Dialogue: 0,0:09:24.27,0:09:26.70,Default,,0000,0000,0000,,from 1930 to 1931.
Dialogue: 0,0:09:27.80,0:09:30.11,Default,,0000,0000,0000,,But we should also check\Nfor other changes
Dialogue: 0,0:09:30.11,0:09:31.70,Default,,0000,0000,0000,,unique to northern Mississippi.
Dialogue: 0,0:09:31.70,0:09:33.20,Default,,0000,0000,0000,,- Huh?\N- What do you mean?
Dialogue: 0,0:09:33.50,0:09:35.40,Default,,0000,0000,0000,,Imagine that bad tornadoes
Dialogue: 0,0:09:35.40,0:09:39.10,Default,,0000,0000,0000,,hit northern but not\Nsouthern Mississippi in 1930.
Dialogue: 0,0:09:39.60,0:09:41.95,Default,,0000,0000,0000,,These tornadoes devastate farms,
Dialogue: 0,0:09:41.95,0:09:44.30,Default,,0000,0000,0000,,causing farmers\Nto default on loans,
Dialogue: 0,0:09:44.60,0:09:46.80,Default,,0000,0000,0000,,which drives their banks\Nout of business.
Dialogue: 0,0:09:47.40,0:09:49.44,Default,,0000,0000,0000,,Then the 6th and 8th districts
Dialogue: 0,0:09:49.44,0:09:52.27,Default,,0000,0000,0000,,would differ in not one\Nbut two ways:
Dialogue: 0,0:09:52.70,0:09:55.05,Default,,0000,0000,0000,,Fed policy and weather.
Dialogue: 0,0:09:55.05,0:09:58.22,Default,,0000,0000,0000,,And we'd have trouble\Nidentifying Fed policy
Dialogue: 0,0:09:58.22,0:10:01.59,Default,,0000,0000,0000,,as the causal factor\Nbehind increased bank failures
Dialogue: 0,0:10:01.59,0:10:02.60,Default,,0000,0000,0000,,in the 8th.
Dialogue: 0,0:10:02.60,0:10:04.25,Default,,0000,0000,0000,,- Ceteris is not paribus.
Dialogue: 0,0:10:07.20,0:10:09.80,Default,,0000,0000,0000,,DD credibility lives or dies\Nwith the claim
Dialogue: 0,0:10:09.80,0:10:13.86,Default,,0000,0000,0000,,that the only reason northern\NMississippi was special in 1930
Dialogue: 0,0:10:13.86,0:10:16.16,Default,,0000,0000,0000,,is differing regional Fed policy.
Dialogue: 0,0:10:16.60,0:10:21.28,Default,,0000,0000,0000,,We're in DD heaven with strong,\Nvisual evidence of parallel trend.
Dialogue: 0,0:10:21.28,0:10:25.55,Default,,0000,0000,0000,,In general, the first step\Nin evaluating whether to use DD
Dialogue: 0,0:10:25.55,0:10:30.20,Default,,0000,0000,0000,,is usually this type of\Nvisual confirmation of parallel trends
Dialogue: 0,0:10:30.20,0:10:31.70,Default,,0000,0000,0000,,outside of the period,
Dialogue: 0,0:10:31.70,0:10:35.01,Default,,0000,0000,0000,,when we expect to see\Na treatment effect.
Dialogue: 0,0:10:35.01,0:10:36.98,Default,,0000,0000,0000,,The treatment in our example
Dialogue: 0,0:10:36.98,0:10:39.84,Default,,0000,0000,0000,,is easy money\Nin the face of bank failures.
Dialogue: 0,0:10:40.50,0:10:45.00,Default,,0000,0000,0000,,Metrics masters use DD\Nto explore effects of many policies
Dialogue: 0,0:10:45.80,0:10:47.90,Default,,0000,0000,0000,,like the minimum legal drinking age,
Dialogue: 0,0:10:48.50,0:10:52.20,Default,,0000,0000,0000,,and environmental changes,\Nlike access to clean water.
Dialogue: 0,0:10:52.90,0:10:54.20,Default,,0000,0000,0000,,In our next video.
Dialogue: 0,0:10:54.50,0:10:57.04,Default,,0000,0000,0000,,We'll see an example\Nof how regression is used
Dialogue: 0,0:10:57.04,0:10:59.20,Default,,0000,0000,0000,,to implement a DD approach.
Dialogue: 0,0:11:00.80,0:11:02.18,Default,,0000,0000,0000,,- [Narrator] Are you a teacher?
Dialogue: 0,0:11:02.18,0:11:05.79,Default,,0000,0000,0000,,Click to explore ways\Nto use these videos in class.
Dialogue: 0,0:11:05.79,0:11:08.85,Default,,0000,0000,0000,,If you're a learner,\Nmake sure this video sticks
Dialogue: 0,0:11:08.85,0:11:11.20,Default,,0000,0000,0000,,by taking a few quick\Npractice questions.
Dialogue: 0,0:11:11.60,0:11:14.20,Default,,0000,0000,0000,,Or if you're ready.\Nclick for the next video.
Dialogue: 0,0:11:14.60,0:11:17.19,Default,,0000,0000,0000,,You can also check out\NMRU's website
Dialogue: 0,0:11:17.19,0:11:20.17,Default,,0000,0000,0000,,for more courses,\Nteacher resources, and more.