The original paper concluded that debt overhang above 90% of GDP would result on growth of -0.1%. This was based on three serious flaws – 2 of methodology, one of spreadsheet programming. The corrected figure is 2.2%. To pretend that this is not a big deal is disingenuous considering how widely the 2010 paper was cited. It’s true that the 2012 paper is more accurate and also that higher debt leads to lower growth, but to gloss over the severe flaws of the earlier paper is misleading. I would respect Reinhart and Rogoff a lot more for simply acknowledging the errors and repudiating their previous conclusion; instead they essentially argue their errors ought to have been caught earlier.
Comments
(copied from my comment on the article)
The original paper concluded that debt overhang above 90% of GDP would result on growth of -0.1%. This was based on three serious flaws – 2 of methodology, one of spreadsheet programming. The corrected figure is 2.2%. To pretend that this is not a big deal is disingenuous considering how widely the 2010 paper was cited. It’s true that the 2012 paper is more accurate and also that higher debt leads to lower growth, but to gloss over the severe flaws of the earlier paper is misleading. I would respect Reinhart and Rogoff a lot more for simply acknowledging the errors and repudiating their previous conclusion; instead they essentially argue their errors ought to have been caught earlier.
and also that higher debt leads to lower growth
Or that lower growth leads to higher debt. See Krugman's chart at http://krugman.blogs.nytimes.com/2013/04/16/reinhart-rogoff-....