May 01, 20 the weight of the evidence indicates that high debt slows growth, but there is no magic threshold above which any country at any time will experience slower growth. Does high public debt consistently stifle economic growth. Rearrange individual pages or entire files in the desired order. Carmen reinhart, peterson institute for international economics, nber. Apr 16, 20 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 kenneth rogoff. Reinhart and rogoff were wrong even without the spreadsheet.
The fomc has in fact essentially behaved as if it was price level targeting. Apr 18, 20 this is the academics version of the dream where youre naked in public. At the time i wrote this post, i didnt know of the existence of this great one, from christopher gandrud, take a look. Randall wray june 2010 the levy economics institute working paper collection presents research in progress by levy institute scholars and conference participants. Our analysis is based on new data on fortyfour countries spanning about two hundred years. This paper offers a panoramic analysis of the history of financial crises dating from englands fourteenthcentury default to the current united states subprime financial crisis.
Known as thistimeisdifferent syndrome, this unrealistic optimism afflicted bankers, investors and policy makers before the 1930s great depression, the 1980s third world debt crisis, the. Reinhart and rogo s claim to have identi ed an important stylized fact, that public debt loads greater than 90 percent of gdp consistently reduce gdp growth. Harvard economists carmen reinhart and kenneth rogoff have published an errata to their 2010 paper on public debt and growth, acknowledging more errors in the figures, but leaving their basic. I see the paper here, and in the 20 errata i see a. The weight of the evidence indicates that high debt slows growth, but there is no magic threshold above which any country at any time will experience slower growth. First, domestic debt accounts for almost twothirds of public debt. E44, e62, f30, n20 abstract we study economic growth and inflation at different levels of government and external debt. Apr 26, 20 reinhart and rogoff identified what they said was one such tendency, but they and the policy makers who seized upon this work pushed the argument too far. Rogoff authorized for distribution by stijn claessens december 20 abstract even after one of the most severe multiyear crises on record in the advanced. Despite common but irregular instances of financial crises, the general tendency has been to examine these as episodic events of financial disruptions so that there has not emerged a. Download original spreadsheet from reinhartrogoff growth.
Debt intolerance is indeed intimately linked to the pervasive phenomenon of serial default that has plagued so many countries over the past two centuries. Upload a corrupt or damaged pdf and we will try to fix it. Past and ongoing real house price cycles and banking crises. Cabot professor of public policy and professor of economics at harvard university. Response from reinhart and rogoff the new york times. We identify the major public debt overhang episodes in the advanced e. On average, public debt rose by more than 80 percent within three years after a crisis. Paul krugman kindly referred to our results in his blog saying john irons and josh bivens have the best takedown yet of the reinhart rogoff paper pdf claiming that debt over 90 percent of gdp leads to drastically slower growth. E32,e44,f44,g01,n10,n20 abstract we examine the evolution of real per capita gdp around 100 systemic banking crises. Also, recent theoretical work has begun to focus on the nexus between domestic debt, sovereign default and, in some instances, inflation see for instance. This time is different, an update update on carmen m. Rogoff norway, spain, and sweden, the drop in annual output growth from peak to trough is over 5 percent, and growth remained well below precrisis trend even after three years. It is an extremely valuable research agenda, as much of modern sovereign debt literature has focused on recent post 1980 episodes, which give only a partial and potentially misleading view.
Reinhart, rogoff, and the excel error that changed. Prior to this dataset, it was exceedingly difficult to get more than two or three decades of pub. Herndon responds to reinhart rogoff business insider. Among other things, we note that policymakers should not be overly cheered by the absence of. Apr 17, 20 following is a statement on tuesday from professors carmen reinhart and kenneth rogoff in response to a new paper that cited flaws in their 2010 study, growth in a time of debt. 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. Reinhart and rogoff were wrong even without the spreadsheet error. This is the rst formal application of the core dataset described in reinhart and rogoff 2009a, and the scope. At the time i wrote this post, i didnt know of the existence of this great one, from christopher gandrud, take a look 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. In this sense, policy since 2008 looks close to optimal.
Reinhart, rogoff admit excel mistake, rebut other critiques. Eight centuries of financial folly, were primarily organized around themes. For three years, the turn to austerity has been presented not as a choice but as a necessity. Second, the data help to explain the puzzle of why countries default on external debts at seemingly low debt thresholds.
An even stronger regularity found in the literature on modern financial crises e. Chartbook that spans more than two centuries of data and documents the crisis experience and. From financial crash to debt crisis scholars at harvard. The reinhartrogoff error or how not to excel at economics.
Reinhartrogoff response to critique real time economics wsj. To contact the editor responsible for this article. May 27, 20 the reinhart rogoff 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. Newly developed long historical time series on public debt, along with modern data on external debts, allow a deeper analysis of the cycles underlying serial debt and banking crises. Kenneth saul ken rogoff born march 22, 1953 is an american economist and chess grandmaster. The forgotten history of domestic debt reinhart 2011. Part of the costs of these crises owes to the protracted nature of recovery. Published in volume 26, issue 3, pages 6986 of journal of economic perspectives, summer 2012, abstract. Reinhart and rogoff find that a 60 percent debttogdp ratio is a better cutoff in emerging economies and that 90 percent is a better cutoff in advanced economies. May 06, 20 if you are mainly interested in the argument between reinhart and rogoff and the university of massachusetts at amherst team that last month criticized them, read hamiltons lucid evaluation of. Kaminsky and reinhart, 1999 and reinhart and rogoff, 2008b is that countries.
Of course the more fundamental point that came up in the wake of excelgate is that reinhart rogoff show nothing about causation. Japan, with its gross debt of 240 percent of gdp and a net debt of 155 percent of gdp, still has a 10year nominal interest rate of 0. The data file rr2010 has the subset for the united states. Apr 18, 20 rogoff and reinhart s research on debt and austerity finally collapsed under scrutiny of a team from the university of massachusettsamherst, which received the numbers from the economists. The misreading of reinhart and rogoff advisor perspectives. Reinhart and rogoff 2009 provided long dated time series on domestic and external public debt. Reinhart and rogoff s work showed average real economic growth slows a 0. Debt and growth in a time of controversy the heritage.
This time is different, an update oregon office of. An important book that will affect policy discussions for a long time to come, this time is different exposes centuries of financial missteps. Eight centuries of financial folly kindle edition by reinhart, carmen m. The analysis, narrative, and illustrations in reinhart and rogoff 2009, this time is different. Third, domestic debt which is often larger than the monetary base in the runup to high inflation has largely been ignored in the inflation literature. A read is counted each time someone views a publication summary such as the title, abstract, and list of authors, clicks on a figure, or views or downloads the fulltext. 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, which.
Common sequencing patterns in financial crises we document that the global scope and depth of the crisis the began with the collapse of the subprime mortgage market in the summer of 2007 is unprecedented in the post world war ii era and, as such, the most relevant. As table 1 documents of 21 advanced economies had at least one credit event. Reinhart and rogoff identified what they said was one such tendency, but they and the policy makers who seized upon this work pushed the argument too far. This is true even though the committee did not explicitly say that maintaining the price level path was an ultimate goal. Documents in econstor may be saved and copied for your personal and. The last slide illustrates return to peak timelines for the big 5 financial crisis plus the current u. The rogoffreinhart data scandal reminds us economists arent. I want to access the infamous excel spreadsheet from reinhart and rogoff s 2010 paper growth in a time of debt. Some lessons learned and those forgotten1 prepared by carmen m.
This chartbook provides a pictorial history, on a countrybycountry basis, of public debt and economic crises of various forms. More importantly, the logic of my argument is that, to. I want to address here what i feel are the major misinterpretations of our work, which will in part require engaging with the claims made in reinharts. Reinhart and rogoff 2004, which classified exchange rate arrangements for. It is well known that debt tolerance differs widely even within those categories.
Financial and sovereign debt crises international monetary fund. Politicians, commentators, and activists widely cited the paper in political debates over the effectiveness of austerity in fiscal. An international historical comparison by carmen m. Jan 10, 2012 the misreading of reinhart and rogoff january 10, 2012 by robert huebscher if the rallying cry for deficit reduction rests on an intellectual framework, it would be the work of carmen reinhart and ken rogoff, whose book, this time is different, has been hailed for its exhaustive historical study of financial crises. Reinhart and rogoff publish formal correction financial. If the gamepad is not in use for a long time it automatically. E6,f3,n0 abstract this paper offers a panoramic analysis of the history of financial crises dating from englands fourteenthcentury. Eight centuries of financial folly is one of the best, if not the best, books ever written on the history of financial crises. As one critical case in point, referring to the data from rr that we show in table 1. Apr 17, 20 a new paper, by university of massachusetts amherst economics doctoral student thomas herndon and professors michael ash and robert pollin, says harvard university scholars carmen reinhart and. On reinhart and rogoff committee for a responsible federal. Oct 12, 2016 reinhart and rogoffs definition we mark a banking crisis by two types of events.
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. Microsoft excel files can contain thousands of cells filled with data. The aftermath of financial crises american economic association. Data available at time of publication dec 2008 data available today sep 2011 notes. It is a timeline of a countrys creditworthiness and financial turmoil. The data are presented in excel, stata and text file formats. Its the mortifying reality for rr, who have admitted that they forgot to drag their excel. Is the 2007 us subprime financial crisis so different. Rogoff authorized for distribution by stijn claessens december 20 abstract even after one of the most severe multi. Use features like bookmarks, note taking and highlighting while reading this time is different. Critique of reinhart and rogoff page 3 of 23 their long historical time period, 17902009. This time is different, an update oregon economic news.
Section ii summarizes highlights from a first view of the extended dataset, with special reference to the current conjuncture. A critique of this time is different, by reinhart and rogoff by yeva nersisyan l. Discussion of qian, reinhart, and rogoffs on graduation. Recover content and data from corrupt files with ease.