Tuesday, April 16, 2013

Is the Reinhart/Rogoff Paper Incorrect- A Trio of Researches Throw Down the Gauntlet

A trio of UMass Amherst researchers have come out and stated flat out that the Reinhart/Rogoff paper is just plain wrong. Not only in the analysis, but calling it out as shoddy research. I wonder if the researchers critiquing the Reinhart/Rogoff paper have an axe to grind or if they really want the notority this is sure to garner. The abstract reads

Herndon, Ash and Pollin replicate Reinhart and Rogoff (2010a and 2010b) and find that coding errors, selective exclusion of available data, and unconventional weighting of summary statistics lead to serious errors that inaccurately represent the relationship between public debt and GDP growth among 20 advanced economies in the post-war period. They find that when properly calculated, 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 published in Reinhart and Rogo ff. That is, contrary to RR, average GDP growth at public debt/GDP ratios over 90 percent is not dramatically different than when debt/GDP ratios are lower.

The authors also show how the relationship between public debt and GDP growth varies significantly by time period and country. Overall, the evidence we review contradicts Reinhart and Rogoff 's claim to have identified an important stylized fact, that public debt loads greater than 90 percent of GDP consistently reduce GDP growth.

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