Checkmate for Reinhart-Rogoff?

Kenneth Rogoff is now a noted Harvard economist but he was once one of the strongest chess Grandmasters, and considered a Championship contender. I mention that, because it turns out that a key paper of his seems to include a patzer's blunder. The most famous result of his collaboration with his colleague Carmen Reinhart, one of the most influential economic papers (and books)of recent years, turns out to be critically flawed. In addition to some questionable choices in selection of data and equally questionable conclusions from their data, it seems that they made a critical calculational error in their Excel spreadsheet.

This is important, because their paper was one of the chief theoretical arguments for the austerity fever that has gripped Europe and the US Congress. The error was found by Thomas Herndon, Michael Ash, and Robert Pollin. Mike Konczal, AKA Rortybomb, has an excellent summary here. Excerpt:

In 2010, economists Carmen Reinhart and Kenneth Rogoff released a paper, "Growth in a Time of Debt." Their "main result is that...median growth rates for countries with public debt over 90 percent of GDP are roughly one percent lower than otherwise; average (mean) growth rates are several percent lower." Countries with debt-to-GDP ratios above 90 percent have a slightly negative average growth rate, in fact. ...

Coding Error. As Herndon-Ash-Pollin puts it: "A coding error in the RR working spreadsheet entirely excludes five countries, Australia, Austria, Belgium, Canada, and Denmark, from the analysis. [Reinhart-Rogoff] averaged cells in lines 30 to 44 instead of lines 30 to 49...This spreadsheet responsible for a -0.3 percentage-point error in RR's published average real GDP growth in the highest public debt/GDP category." Belgium, in particular, has 26 years with debt-to-GDP above 90 percent, with an average growth rate of 2.6 percent (though this is only counted as one total point due to the weighting above).

Read more:

Mike has lots of other good stuff, and many of the most prominent economic voices have weighed in today. Paul Krugman reacts here and responds to the R-R response here. From the latter:

So this is really disappointing; they’re basically evading the critique. And that’s a terrible thing when so much is at stake.


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