Herndon responds to reinhart rogoff business insider. 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. We identify the major public debt overhang episodes in the advanced e. Since they will now have to exit the debate, the quality of who. Letters to the editor reinhart and rogoff january 31, 2012 the following are in response to robert huebschers article, beyond reinhart and rogoff, which appeared last week. Growth in a time of debt, also known by its authors names as reinhartrogoff, is an. The financial crisis of the late 2000s is only the latest manifestation of the theme. The diverse effects of increasing debt on national economic growth pdf. 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. She has testified before congress and is listed among foreign policys top 100 global thinkers, thompson reuters the worlds most influential scientific minds, and bloomberg markets most influential 50 in finance. The big news in the world of academic economics was that a celebrated and hugely influential paper by the harvard duo on the. 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. Its the mortifying reality for rr, who have admitted that they forgot to drag their excel. For example, it constitutes roughly 10% of the us federal reserves main monetary aggregate, m2.
Eight centuries of financial folly kindle edition by reinhart, carmen m. Signin to download and listen to this audiobook today. This time is different is a thorough description of various financial crisis that have occurred during the last eight centuries. Jan 17, 2012 letters to the editor the misreading of reinhart and rogoff january 17, 2012 by various the following are in response to robert huebschers article, the misreading of reinhart and rogoff, which appeared last. Fund and the world bank, is the coeditor of the first global financial crisis of the. Reinhart and rogoff s latest paper warns on financial repression harvard duo argue that advanced countries will not be able to return to more sustainable levels of debt through austerity and. Critique of reinhart and rogoff page 3 of 23 their long historical time period, 17902009. Previously, she was the dennis weatherstone senior fellow at the peterson institute for international economics. Reinhart and rogoff write,that basic data on domestic debt are so opaque and difficult to obtain is proof that governments will go to great lengths to hide their books when things are going wrong, just as financial institutions have done in the contemporary crisis. The reinhartrogoff error or how not to excel at economics. Debt and growth in a time of controversy the heritage. Some lessons learned and those forgotten1 prepared by carmen m. 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. Reinhart and rogoff s work showed average real economic growth slows a 0.
Nov 20, 20 for carmen reinhart and ken rogoff, 20 has been a year to forget. Politicians, commentators, and activists widely cited the paper in political debates over the effectiveness of austerity in fiscal policy for debtburdened economies. Dear editor, id like to convey my compliments to mr. F3, f31, f34 abstract this paper introduces the concept of debt intolera nce, which manifests itself in the extreme duress many emerging markets experience at debt levels that would seem manageable by advanced country standards. 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.
On reinhart and rogoff committee for a responsible federal. Apr 22, 20 reinhart and rogoffs work showed average real economic growth slows a 0. Tradeoffs among exchange rates, monetary policies, and capital mobility maurice obstfeld university of california, berkeley, nber, and cepr. Reinhart and rogoff acknowledged a calculation error but said it did not affect. Reinhart, rogoff admit excel mistake, rebut other critiques. Data on outstanding debt owed to china by country, 20002017 here. We would like to thank michael bordo, josefin meyer, maurice obstfeld, vincent reinhart, and ken rogoff, the editor, two anonymous referees, and seminar participants at columbia university, harvard university, the international monetary fund, and the university of melbourne for helpful comments and suggestions. As one critical case in point, referring to the data from rr that we show in table 1. Reinhart and rogoff responding to our critics nytimes. Reinhart and rogoff divide their work into discussions of sovereign defaults, both domestic and foreign, exchange rate crises, inflation crises and banking crises. Reinhart page 5 books capital mobility and monetary policy, volume 18, with miguel fuentes and claudio raddatz, editors, santiago.
Editor talks reinhart rogoff excel error business insider. Despite advances in transactions technologies, paper currency still constitutes a notable percentage of the money supply in most countries. E32,e44,f3,n20 abstract this paper examines the depth and duration of the slump that invariably follows severe financial crises, which tend to be protracted affairs. Does high public debt consistently stifle economic growth. Reinhart is ranked among the top economist worldwide based on publications and scholarly citations. The aftermath of financial crises american economic. A panoramic view of eight centuries of financial crises, annals of. Article pdf 162kb understanding the second great contraction. Nber working paper series debt intolerance kenneth s.
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. 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. Workbook for foundations of international macroeconomics with maurice obstfeld and gita gopinath, cambridge, ma mit press, february 1998, 129 pp. Huebscher for his clearly written and well thought out critique of reinhart and rogoff, lacy hunt et al. Eight centuries of financial folly is one of the best, if not the best, books ever written on the history of financial crises. Umass student exposes serious flaws in harvard economists influential study.
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. Pdf the main theme of this paper is that debt cycles deeply entrenched in the process of development, and. Written by carmen reinhart, kenneth rogoff, audiobook narrated by sean pratt. 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. 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. Debt intolerance is a term coined by carmen reinhart, kenneth rogoff and miguel savastano referring to the inability of emerging markets to manage levels of external debt that, under the same circumstances, would be manageable for developed countries, making a direct analogy to lactoseintolerant individuals. And, indeed, rogoff and reinharts ad hoc modifications to defend their position is a common feature of standard scientific process. Reinhartrogoff response to critique real time economics wsj.
John cassidy has been a staff writer at the new yorker since 1995. Rogoff present a thorough historical and statistical tour of. Rogoff authorized for distribution by stijn claessens december 20 abstract even after one of the most severe multiyear crises on record in the advanced. Advancedeconomy episodes since 1800, with vincent r. Using clear, sharp analysis and comprehensive data, reinhart and rogoff document that financial fallouts occur in clusters and strike with surprisingly consistent frequency, duration, and ferocity. Peterson institute for international economics, september 2011.
Reinhart and rogoffs latest paper warns on financial. Reinhart, rogoff, and the excel error that changed. Reinhart and rogoff s work, based on investigations of empirical data from 800 years of financial crises, shows that such downturns are exceptionally deep and long lasting, as well as. The reinhart rogoff research is best known for its result that, across a broad range of countries and historical periods, economic growth declines dramatically when a countrys level of public debt exceeds 90% of gross domestic product.
Cabot professor of public policy and professor of economics at harvard university. Your piece serves your readership in two valuable ways. At the time i wrote this post, i didnt know of the existence of this great one, from christopher gandrud, take a look. Apr 18, 20 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. Thomas herndon born 1985 is an assistant professor of economics at loyola marymount university, who, as a graduate student at the university of massachusetts, became known for critiquing growth in a time of debt, a widely cited academic paper by carmen reinhart and kenneth rogoff supporting the austerity policies implemented by governments in europe and north america in the early 21st century. Eight centuries of financial folly princeton university press, september 2009, the bestselling academic book he coauthored with fellow economist carmen reinhart, is that we are working through a recession linked to a deep financial crisis. Apr 26, 20 the problem in american politics today isnt that krugman, reinhart, and rogoff couldnt agree on a plan theyre all happy with. We will never share your email address with third parties without your permission. Sovereign debt relief and its aftermath reinhart 2016.
The article proposes a new approach to the reinhartrogoff affair. The reinhartrogoff controversy as an instance of the. Apr 18, 20 this is the academics version of the dream where youre naked in public. To contact the editor responsible for this article. Section ii summarizes highlights from a first view of the extended dataset, with special reference to the current conjuncture.
This time is different audiobook by carmen reinhart. It is particularly helpful to take out global factors, so as to be able to focus on idiosyncratic country trends. 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. 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. Kenneth saul ken rogoff is an american economist and chess grandmaster. Last week, we were sent a sharply worded paper by three researchers from the university of massachusetts, amherst, at the same time it. Its that the republican party would never agree to it. I have just modified one external link on growth in a time of debt. Kenneth roggoff and mark gertler, editors, mit press, 2005. Future studies should investigate the effects of public debt on the economic growth in the. If you have any questions, or need the bot to ignore the links, or the page altogether, please visit this simple faq for additional information. Academic papers kenneth rogoff scholars at harvard. Among other things, we note that policymakers should not be overly cheered by the absence of. Letters to the editor the misreading of reinhart and rogoff january 17, 2012 by various the following are in response to robert huebschers article, the misreading of reinhart and rogoff, which appeared last week.
So the causality problem has been well known for some time. Forbes takes privacy seriously and is committed to transparency. 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. Reinhart and rogoff present a sobering reminder that financial crises are a serial phenomenoncaused in no small part by the seductive thistimeisdifferent syndrome, the prevalent belief that to us, here and now, old economic laws of motion no longer apply. Zombanakis professor of the international financial system at harvard kennedy school.
Appendix table 1 recent literature on public, private, and. Appendix table 1 recent literature on public, private, and external debt and growth study sample, frequency, country, coverage methodologycomments main conclusions arkand, berges, and panizza 2012 examine whether there is a threshold above which financial development no longer has a positive effect on economic growth. A big part of the problem, as harvard economist kenneth rogoff pointed out in this time is different. Reinhart and rogoffs latest paper warns on financial repression. Reinhart and rogoff january 31, 2012 by various the following are in response to robert huebschers article, beyond reinhart and rogoff, which appeared last week. The findings may help governments and policymakers to design their fiscal policy by investigating how existing debts affect the growth level.
Nber working paper series debt intolerance kenneth. Editor talks reinhartrogoff excel error, business insider, april 20. 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. For all of the illuminating work reinhart and rogoff have done on the. 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. The imf 2004 paper was prescient in calling the housing bubbles in the spain and ireland. Reinhart nee castellanos, born october 7, 1955 is an american economist and the minos 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. Published in volume 26, issue 3, pages 6986 of journal of economic perspectives, summer 2012, abstract. Dealing with debt with carmen reinhart and vincent reinhart, journal of international economics 96supplement 1. She was senior policy advisor and deputy director at the international monetary fund and held positions as chief economist and vice president at the investment bank bear stearns in the 1980s.
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