Austerity Research Fail

Going viral on Twitter is Mike Konczal’s post on the infamous Reinhart and Rogoff paper – the paper that has been cited over and over again in support of austerity policies across the world.  Konczal reveals a recent effort to replicate the Reinhart/Rogoff results by Thomas Herndon, Michael Ash, and Robert Pollin of the University of Massachusetts, Amherst.  The conclusion:

They find that three main issues stand out. First, Reinhart and Rogoff selectively exclude years of high debt and average growth. Second, they use a debatable method to weight the countries. Third, there also appears to be a coding error that excludes high-debt and average-growth countries. All three bias in favor of their result, and without them you don’t get their controversial result….

…So what do Herndon-Ash-Pollin conclude? They find “the average real GDP growth rate for countries carrying a public debt-to-GDP ratio of over 90 percent is actually 2.2 percent, not -0.1 percent as [Reinhart-Rogoff claim].” Going further into the data, they are unable to find a breakpoint where growth falls quickly and significantly.

The supposedly-obvious causal link between debt and growth is more ephemeral than many would like to believe.

About Tim Duy 348 Articles

Tim Duy is the Director of Undergraduate Studies of the Department of Economics at the University of Oregon and the Director of the Oregon Economic Forum.

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