The Phase Locking Distance Index and Dual Breach Principle: A Multi-Dimensional Framework for Synchronized Crisis Risk and Policy Evaluation in Advanced Economies, with Detailed Application to Australia and Canada

Lai, Yehong (2026): The Phase Locking Distance Index and Dual Breach Principle: A Multi-Dimensional Framework for Synchronized Crisis Risk and Policy Evaluation in Advanced Economies, with Detailed Application to Australia and Canada.

Abstract

This paper introduces a multi-dimensional framework for measuring synchronized macroeconomic crisis risk in advanced economies, with detailed first application to Australia. We define the Phase Locking Distance Index (PLDI) as the geometric mean distance between four key dimensions—inflation (A), unemployment (B), federal fiscal sustainability (C), household debt (H)—and their crisis thresholds. The framework integrates four capabilities: multi-dimensional risk monitoring; ex-ante policy evaluation via the Policy Phase Locking Elasticity (PPLE); Sequenced Demolition counterfactual analysis; and dual-frequency mechanism robustness.

Empirical validation comprises three tests on a 33-country panel (1980-2025 quarterly, merged with Laeven-Valencia and Jordà-Schularick-Taylor). Joint validation with the Borio-Drehmann credit gap establishes PLDI as a complementary signal (M1 −3.74 → M3 −5.32, p < 0.0001 country-clustered; joint AUC 0.853). Direct causal identification via Jordà local projections on 17-country high-frequency monetary shocks shows monetary tightening lowers PLDI at h=13 quarters. Cox proportional-hazards reproduces the mechanism at both quarterly (z=−3.32) and annual JST (z=−4.09) frequencies.

We propose the Dual Breach Principle: 28/30 = 93.3% of historical crisis cases (1929-2024) converge to crisis within 6-24 months conditional on subsequent banking-crisis sequel. PPLE validates against a 15-case ex-post track record (14/15 = 93.3% hit rate, 8 countries, political-symmetry verified). Australia's 2026 aggregate PPLE = −0.35 (90% CI [−0.55, −0.15]); Canada's portfolio is materially less synchronizing (−0.085).

v0.13 robustness check: PA-basis/ESA EDP cross-country C-channel convention substitution preserves the complementary-signal finding (common-N M3 AUC strengthens to 0.864) and 14/15 case hit rate. Pre-registered falsification thresholds all not triggered.

• Item Type: MPRA Paper
• Language: English
• Keywords: Phase Locking Distance Index; Dual Breach Principle; Policy Phase Locking Elasticity; macro-financial crisis; phase synchronization; household debt; fiscal sustainability; inflation expectations; monetary policy; Australia; Canada
• Subjects: E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E32 - Business Fluctuations ; Cycles; E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E44 - Financial Markets and the Macroeconomy; E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E52 - Monetary Policy; E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook > E62 - Fiscal Policy; G - Financial Economics > G0 - General > G01 - Financial Crises; G - Financial Economics > G1 - General Financial Markets > G18 - Government Policy and Regulation; G - Financial Economics > G2 - Financial Institutions and Services > G28 - Government Policy and Regulation

References

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