Krugman thinks we need to worry about growth now and begin debt reduction soon. Six weeks later, discussions of herndon, ash and pollins challenge to reinhart and rogoff continue in earnest in the economics blogosphere, in the. From financial crash to debt crisis scholars at harvard. But debt is also reduced through financial repression, a tax on bondholders and savers via negative or below. Rogoff and reinhart defend their numbers business the. What the reinhartrogoff debacle tells us about the. If i have time, i may take a look at the data, but time is currently thin and this particular battle doesnt leave me. The problem in american politics today isnt that krugman, reinhart, and rogoff couldnt agree on a plan theyre all happy with.
Herndon responds to reinhart rogoff business insider. A low debttogdp ratio indicates an economy that produces and sells goods and services sufficient to pay back debts without incurring further debt citation needed. Reinhart and rogoff publish formal correction financial. On reinhart and rogoff committee for a responsible. The world economic forum is an independent international organization committed to improving the state of the world by engaging business, political, academic and other leaders of society to shape global, regional and industry agendas. World aggregate, 19002010 a composite index of banking, currency, sovereign default, and inflation crises, and stock. Reinhart and rogoffs superb book is a mustread for anyone looking to understand past and present crises, as well as navigate those of tomorrow. Published in volume 26, issue 3, pages 6986 of journal of economic perspectives, summer 2012, abstract.
If this is your first time registering, please check your inbox for more information about the benefits of your forbes account and what you can do next. Carmen reinhart of the university of maryland and kenneth rogoff of harvard study the. They deny asserting that the debtgrowth relationship is causal, but keep making statements that insinuate that it is. The central bank report for 1988 gave somewhat more indication of financial concern.
Financial and sovereign debt crises international monetary fund. Reinhart, rogoff, and the excel error that changed. They replicated the influential reinhartrogoff paper growth in a time of debt. Its that the republican party would never agree to it. A panoramic view of eight centuries of financial crises carmen m. Rogoff present a thorough historical and statistical tour of financial hubris through the centuries, a postmortem that will make you wonder. Reinhartrogoff recrunch the numbers hear it from the experts let our global subject matter experts broaden your perspective with timely insights and opinions you cant find anywhere else. Section ii summarizes highlights from a first view of the extended dataset, with special reference to the current conjuncture. If we use the reinhartrogoff method, we would equally weight the.
Our analysis is based on new data on fortyfour countries spanning about two hundred years. Id say that theyre still trying to have it both ways, on two fronts. A brief guide to the reinhartrogoff discussion world. Kalemliozcan, sebnem, carmen reinhart, and kenneth rogoff. The modern policy debate often presumes that the main cost of high public debt ultimately comes from sovereign default, with all its attendant disruptions and dislocations. Randall wray criticized reinhart and rogoff for combining data across centuries, exchange rate regimes, public and private debt, and. Ghosh january 2015 abstract high public debt often produces the drama of default and restructuring. For this, we use an empirical model based on the theoretical neoclassical growth model with some proven relevant economic variables. Kaminsky and reinhart, 1999 and reinhart and rogoff, 2008b is that countries. Thomas herndon born 1985 is an assistant professor of economics at loyola marymount university, who, as a graduate student at the university of massachusetts.
Reinhart and rogoff 2004, which classified exchange rate arrangements for the postworld. Roubini and schimmelpfennig 2003, kohlscheen 2007, reinhart, rogoff and. On average, public debt rose by more than 80 percent within three years after a. Reinhart and rogoffs latest paper warns on financial. Rogoff and reinhart think we should begin debt reduction now. Tourinho2 and rafael sangoi3 this paper aims to test the hypothesis raised by reinhart and rogoff on the relationship between public debt and economic growth. At the time i wrote this post, i didnt know of the existence of this great one, from christopher gandrud, take a look. Though kenneth rogoff has written some fairly obtuse opeds over the years, the book he coauthored with carmen reinhart, this time is different, was. The eventual replication of the data from the reinhartrogoff paper on 90% debtgdp threshold has sparked vibrant discussion on the impact of errorridden research on austerity policies around the world. On average, public debt rose by more than 80 percent within three years after a crisis. On april, the 15th, an article was published that will change economic theories or at least, it will questionate and change the methods employed to formule those theories. Growth in a time of debt, also known by its authors names as reinhartrogoff, is an.
However, we fi nd that countries with a public debt overhang tions and dislocations. This is at odds with the reinhart and rogoff chronology, and roughly consistent with the new measure and the imf chronology. Which brings us to carmen reinhart and kenneth rogoff, the economists whose work on the relationship between high public debt levels and economic growth came. There were many responses on the internet, including jared bernstein, matt yglesias, dean baker, paul krugman, and many, many others. Harvard economists carmen reinhart and kenneth rogoff have published an errata to their 2010 paper on public debt and growth, acknowledging more errors in. Paul krugman on the latest reinhartrogoff selfdefense. Harvard university economists carmen reinhart and kenneth rogoff have acknowledged making a spreadsheet calculation mistake in a 2010 research paper, growth in a time of debt pdf. Politicians, commentators, and activists widely cited the paper in political debates over the effectiveness of austerity in fiscal policy for debtburdened. Reinhart and rogoff argued that there was, and thats what gave their profiscalconsolidation message its potency. That reinhart and rogoff committed a spreadsheet error. Reinhart many emerging market countries have suffered financial crises. For carmen reinhart and ken rogoff, 20 has been a year to forget. If you combine data covering dozens of countries collected since the second world war, you find that higher debttog.
We identify the major public debt overhang episodes in the advanced e. Since the early 1800s, the incidence of banking crises is similar for advanced and emerging economiesthe postworld war ii period is the era when crises visited the wealthy economies with less frequency. Among other things, we note that policymakers should not be overly cheered by the absence of. Yesterday i wrote about a paper by thomas herndon, michael ash and robert pollin of university of massachusetts, amherst. In economics, the debttogdp ratio is the ratio between a countrys government debt measured in units of currency and its gross domestic product gdp measured in units of currency per year. Ii and, to a lesser extent, world war i, which then merges with the depression era debt buildup. Rogoff war ii period provided the ongoing late2000s global financial crisis is taken into account. So the relationship between debt and gdp growth seems to be somewhat downwardsloping. Thus, this study of the aftermath of severe financial crises includes a number of recent emerging market cases to. E6,f3,n0 abstract the historical frequency of banking crises is quite similar in high and middletolowincome countries, with quantitative and qualitative parallels in both the runups and the aftermath. Reinhart and rogoff 2008a included all the major postwar banking crises in the developed world a total of 18 and put particular emphasis on the ones dubbed the big five spain 1977, norway 1987, finland, 1991, sweden, 1991, and japan, 1992. E6,f3,n0 abstract this paper offers a panoramic analysis of the history of financial crises dating from englands fourteenthcentury.
In their response, reinhart and rogoff make much of the fact that herndon et al. Reinhartrogoff response to critique real time economics. The big news in the world of academic economics was that a celebrated and hugely influential paper by. The reinhartrogoff 90 percent cliff was widely accepted policy wisdom for more than three years, which suggests the internal policing in the economics profession is pretty damn weak. Kenneth rogoff and carmen reinhart, the economists accused of getting their sums wrong in an influential study of the impact of high government debt, have hit. Of course the more fundamental point that came up in the wake of excelgate is that reinhartrogoff show nothing about causation. Cxvii may 2002 issue 2 fear of floating guillermo a. The aftermath of financial crises american economic. Eight centuries of financial folly is one of the best, if not the best, books ever written on the history of financial crises. A new paper by thomas herndon, michael ash and robert pollin calls into question research on public debt and its effects on growth by harvard university economists carmen reinhart and. Belen sbrancia authorized for distribution by atish r.
It reported that in the summer, rivate bond yields rose steeply, apparently as a result of a very p. Pdf on jan 1, 2011, carmen m reinhart and others published a decade of. I was going to post something sort of kind of defending reinhartrogoff in the wake of the new revelations not their results, which i never believed, nor their failure to carefully test. Mohamed elerian, author of when markets collide i would say that her carmen reinharts book with ken rogoff on debt crises and financial crises is an extraordinary piece of work. This repo contains replication files for reinhart and rogoff 2010 via herndon et al 2014. E2,e3,e6,f3,f4,n10 abstract we study economic growth and inflation at different levels of government and external debt. If you use all of the right numbers, it turns out growth does slow when debt is high, but not nearly as much as reinhart and rogoff hereafter, rr claimed.
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