The Debt-Growth Controversy
The recent controversy over errors in a 2010 paper by the economists Carmen Reinhart and Ken Rogoff is a sad commentary on the politically toxic atmosphere surrounding fiscal policy in the US, Europe, and Japan. The Reinhart/Rogoff paper is just a small part of a large literature that shows high debt levels to be economically risky.
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STANFORD – The recent controversy over errors in a 2010 paper by the economists Carmen Reinhart and Kenneth Rogoff is a sad commentary on the demands of the 24/7 news cycle and the politically toxic atmosphere surrounding fiscal policy in the United States, Europe, and Japan. In their paper, “Growth in a Time of Debt,” Reinhart and Rogoff estimated large declines in growth associated with public-debt/GDP ratios above 90%. But it contained coding errors discovered by a University of Massachusetts graduate student. When corrected, the effect is substantially smaller, but nonetheless economically consequential.