Over at WCI Nick Rowe has a post up about central banks and economic activity. There is a lesson there, but not the one Nick thinks.
If a house has a good thermostat, we should observe a strong negative correlation between the amount of oil burned in the furnace (M), and the outside temperature (V). But we should observe no correlation between the amount of oil burned in the furnace (M) and the inside temperature (P). And we should observe no correlation between the outside temperature (V) and the inside temperature (P).
Let us start with a quibble, a thermostat is fine but a proper building envelope is equally important. That said, my oil stove does not have a thermostat. In fact, I am the thermostat and I can adjust the heat only through a drip valve. In a mild winter I am far too hot (i.e., I am burning more oil than I need). In a cold winter I am capable of making an adjustment in the drip rate to compensate. In a super cold winter even with the drip valve at maximum I am cold. That means the colder it is, to a point, the more control I have over the temperature. But after that point I am too cold. Now throw in the quality of the building envelope.
Now transcribe this into macroeconomic terms. What are the implications?