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Sunday, April 21

21st Apr - Special: Reinhart & Rogoff Debacle

Kenneth & Rogoff’s seminal paper on countries’ debt levels and how growth slows after debt/GDP passes 90% is being attacked. This is very, very important, as the paper has been the main argument of the “austerians”. 

How Much Unemployment Was Caused by Reinhart and Rogoff's Arithmetic Mistake? CEPR

'How Much Unemployment Was Caused by Reinhart and Rogoff's Arithmetic Mistake?'Economist’s View

Researchers Replicated Reinhart-Rogoff, and There Are Serious Problems.Next New Deal
"selectively exclude years of high debt and average growth. Second, they use a debatable method to weight the countries. Third, there also appears to be a coding error that excludes high-debt and average-growth countries. All three bias in favor of their result, and without them you don’t get their controversial result.”

Influential economic study on austerity may be flawedReuters
One of the key intellectual touchstones in the move towards government austerity efforts around the world may have been incorrect in its conclusions due in part to spreadsheet coding errors.

Reinhart-Rogoff Initial ResponseMoney Supply / FT
The full statement from Carmen Reinhart & Kenneth Rogoff giving an initial response to criticisms of their work.

Reinhart and Rogoff RespondSlate

Austerity Research FailTim Duy’s Fed Watch

Is the evidence for austerity based on an Excel spreadsheet error?Wonkblog / WP

Raining on Reinhart and Rogoffalphaville / FT

Holy Coding Error, BatmanKrugman / NYT
How much damage from a calculation mistake?

Did Reinhart-Rogoff Screw Up Their Debt Research?The Big Picture

Debunking Reinhart & Rogoff’s “Growth in a Time of Debt”PragCap
My big problem with the paper was that they arbitrarily took currency issuing nations and compared them with currency using nations.

More Reinhart and RogoffTim Duy’s Fed Watch

What if all those times really were different?Noahpinion
Sloppy research and no understanding of sovereign currencyEconoMonitor
Counterparties: Beef RogoffFelix Salmon / Reuters
Reinhart-Rogoff, ContinuedKrugman / NYT
A disappointing response.

Debt to GDP & Future Economic Growthowenzidar

A Study That Set the Tone for Austerity Is ChallengedEconomix / NYT

Elementary misuse of spreadsheet data leaves millions unemployedBill Mitchell
Reinhart-Rogoff recrunch the numbersBrussels blog / FT

Why the Argument for Austerity Took a Big Hit YesterdayTIME

Further Further Thoughts On Death By ExcelKrugman / NYT

R&R Admit Excel Mistake, Rebut Other CritiquesWSJ

Researchers Finally Replicated Reinhart-Rogoff, and There Are Serious ProblemsNext New Deal

Austerity R.I.P.: April 16th 2013Bonddad

The Great Debt Delusion: How Math Keeps Proving Austerity WrongThe Atlantic

Reinhart and Rogoff; and The Dangers of Tipping Points, Real and OtherwiseForbes

Blame The Pundits, TooKrugman / NYT

Microsoft Excel: The ruiner of global economies?arstechnica
A paper used to justify austerity economics appears to contain an Excel error. -

'Full Stop,' We Made A Microsoft Excel Blunder In Our Debt Study, And It Makes A DifferenceBI

What if all those times really were different?Noahpinion

Reinhart and Rogoff: your essential reading listThe World / FT

Revisiting Reinhart-RogoffFree exchange / The Economist

Counterparties: R-squared regression analysisFelix Salmon / Reuters

Chart of the day, reverse-causality editionFelix Salmon / Reuters

My take on Reinhart-RogoffQuantitative Finance

How a student took on eminent economists on debt issue - and wonReuters
When Thomas Herndon, a student at the University of Massachusetts Amherst's doctoral program in economics, spotted possible errors made by two eminent Harvard economists in an influential research paper, he called his girlfriend over for a second look.

Reinhart, Rogoff, and How the Macroeconomic Sausage Is MadeHBR

An Understandable Mistakemainly macro
Go into detail within the advanced economies group, and the pattern is clear: the greater the contraction in government spending relative to previous recoveries, the slower the recovery has been.

Is the academic premise for austerity in the eurozone crumbling? Not quite – Open Europe
So what academics (and policymakers) really should debate is whether fiscal transfers are possible and/or desirable.  Proving or disproving R&R is neither here nor there when it comes to dealing with the eurozone crisis.
What the Reinhart-Rogoff debacle tells us about the mysteries of macroeconomicsWonkblog / WP

Debt and GrowthWorthwhile

The ivory fortressFree exchange / The Economist
The notion that journals are there to certify an idea as "ok" has long been anachronistic and a little odd. And while journals were once a means of making knowledge more widely available, they have become, as Mr Shirky noted, a means for restricting access to information. This episode should convince economists that more openness is better.

Guest Post: Reinhart/Rogoff and Growth in a Time Before DebtNext New Deal
Forget Excel: This Was Reinhart and Rogoff's Biggest MistakeThe Atlantic
Correlation is not causation

Correlation, Causality, and CasuistryKrugman / NYT
It looks as if raising debt from 50 to 150 percent of GDP, other things equal, reduces growth by around 0.1 percentage point over the next three years. This is the dreadful consequences that prevents us from doing anything about mass unemployment?
"I don't see this as the product of a rift. I think it's a consequence of the economics starting to dominate the politics"Pieria
Jonathan Portes, Director of NIESR, talks to Pieria about the IMF's criticism of UK government policy and the challenge to Reinhart/Rogoff.

I think Reinhart and Rogoff are both right and wrongEdward Hugh / Facebook

Verifying Empirical Results Needs to be RoutineThe Monkey Cage

Lack Of Nuance Is Not The ProblemKrugman / NYT

How much of Reinhart/Rogoff has survived?Gavyn Davies / alphaville / FT

Reinhart-Rogoff Data AnalysisRobert’s Stochastic Thoughs

Reinhart-Rogoff Argument Didn't Make That Much SenseBrad DeLong

Fatal SensitivityBaseline Scenario
If a method produces results that can drastically change by the addition of a few more data points, are those results worth anything? The answer is no.

A dose of reality for the dismal science - Adam PosenFT

Are Reinhart and Rogoff Right Anyway?EconoMonitor

The Good GlitchKrugman / NYT
Maybe, just maybe, that coding error will turn out to have been a real force for good.

Reinhart/Rogoff-gate isn't the first time austerians have used bad dataWonkblog / WP

Other Austerity BloopersKrugman / NYT
While the Reinhart-Rogoff fiasco is fresh in our minds, it’s worth recalling the other paper that swept through the ranks of the VSPs, briefly becoming orthodoxy, what everyone knew, until people took a hard look at the data.

Why Reinhart and Rogoff Results are CrapEconoMonitor

Reframing Reinhart & RogoffCoppola Comment

The Excel DepressionKrugman / NYT

Correlation, Causality, and CasuistryKrugman / NYT

More Bad ExcelThe Baseline Scenario

Blogs review: The Reinhart and Rogoff debacleBruegel
The authors of the widely acclaimed book on the history of financial crises, This Time is Different, have faced the mother of all academic backlashes after a group of economists identified important flaws (including basic coding errors) in their analysis of the relationship between public debt and economic growth. They, in particular, debunked the now popular notion that there is a debt threshold (90% of GDP) after which economic growth decreases in a nonlinear way. The availability of the dataset (in Stata) has also allowed an econometrician raise serious doubts on the idea that the causality runs from debt to GDP. While the backlash has, until now, centered mostly around this particular work on debt and GDP growth, similar data issues have been identified in the book This Time is Different.

Why the Reinhart-Rogoff paper was flawed right from the startCredit Writedowns


Reinhart-Rogoff data problemsEconbrowser

Destructive CreativityKrugman / NYT
So how is it that economists look so bad? The answer is that too many prominent economists chose, for one reason or another, to reject the existing model. Maybe they were just trying to score points by being different; maybe they were sucked in by the approbation of the VSPs, the rewards that came from telling important people what they wanted to hear.

"Econogate" and JapanBruce Krasting / ZH

Expansionary Austerity: Reinhart&Rogoff and the NeolibsEconoMonitor

Reinhart-Rogoff data problemsEconbrowser


The Unscientific MethodEconomic Incubator

Is More Peer Reviewing the Answer?Jared Bernstein

Perils of placing faith in a thin theoryWolfgang Münchau / FT

Yet More Fun With Reinhart and RogoffCEPR

HAP vs. RR vs. the Pundits: Scoring the Reinhart, Rogoff DisputeCyniconomics

Very Sensitive PeopleKrugman / NYT
As I see it, the sheer enormity of their error makes it impossible for them to respond to criticism in any reasonable way.


Reinhart-Rogoff repriseFree exchange / The Economist

The Doctoral Student Who ‘Happed’ Reinhart and RogoffWSJ


Reinhart-Rogoff and Herndon-Ash-Pollin: a few further commentsEconbrowser

Inside the offbeat economics department that debunked Reinhart-RogoffWonkblog / WP

Growing out of troubleFree exchange / The Economist


Reinhart-Rogoff a Week Later: Why Does This Matter?Next New Deal


Rogoff and Reinhart's little blunder, does it matter?qfinance

Reinhart-Rogoff and Herndon-Ash-Pollin: A Few Further CommentsEconoMonitor

Academic Non-ObscurityKrugman / NYT
Getting the Reinhart-Rogoff story wrong.


Debt, Growth and the Austerity Debate NYT
R&R: In short: many countries around the world have extraordinarily high public debts by historical standards, especially when medical and old-age support programs are taken into account. Resolving these debt burdens usually involves a transfer, often painful, from savers to borrowers. This time is no different, and the latest academic kerfuffle should not divert our attention from that fact.

Reinhart and Rogoff Are Not Being StraightCEPR
Carmen Reinhart and Ken Rogoff, used their second NYT column in a week, to complain about how they are being treated. Their complaint deserves tears from crocodiles everywhere.

The expansionary fiscal contraction that workedEconoMonitor
Despite the International Monetary Fund/World Bank Spring Meetings, as well as a G20 get-together, the biggest economic news of the past two weeks was the mistake in an influential economic study.

Everyone’s Missing the Bigger Picture in the Reinhart-Rogoff DebateWashington’s blog
The money of individuals, businesses, cities, states and entire nations are disappearing into the abyss …and ending up in the pockets of the fatcats. In other words – underneath the easing-versus-tightening debate – this is not a financial crisis … it’s a bank robbery.

Reinhart and Rogoff: Responding to Our Critics – NYT
Significant debt restructurings and write-downs have always been at the core of our proposal for the periphery European Union countries, where it seems to us unlikely that a mix of structural reform and austerity will work.

Grasping At Straw MenKrugman / NYT
Reinhart Rogoff try to defend.


Fiscal RevisionismCFR
The recent challenge to a key finding of Carmen Reinhart and Ken Rogoff’s This Time Is Different (R&R) has roiled the academic world.  But it’s far less clear that it meaningfully changes the politics and economics of deficit reduction.

Refereeing Reinhart-Rogoff DebateView / BB
Lost in all this sound and fury is the real question that we should be debating: Is it appropriate to infer that high debt is driving slower growth, and hence governments need to take greater care before taking on debt? Or is lower GDP growth, or perhaps some other factor, the reason that debt burdens rise?


The Absolutely Final and Definitive Destruction of Reinhart And RogoffEconoMonitor
Furthermore, what little evidence there is for forward causation appears to stem almost entirely from Japanese outliers. Because – as economists generally recognize – Japan is the clearest of all cases of reverse causation, this considerably weakens the argument for forward causation.


Austerity is not the only answer to a debt problemFT
Policy makers must use all the tools available, write Kenneth Rogoff and Carmen Reinhart (short summary here)

Comment on Reinhart and Rogoff's FT articleNot the Treasury View
My letter to the FT responds to Ken Rogoff and Carmen Reinhart's opinion piece (2 May):


More StrawKrugman / NYT
Reinhart and Rogoff disappoint again.

Reinhart and Rogoff

A Decade of (pdf)
(the full research paper that this fuss is all about)

Growth in a Time of DebtNBER

Too Much Debt Means the Economy Can’t Grow: Reinhart and RogoffBB

Debt and growth
Reinhart, Rogoff, August 2010: With the advanced economies at a critical juncture, some economists are urging more fiscal stimulus while others argue that raising debt levels will stunt growth. This column presents the Reinhart-Rogoff findings on the relationship between debt and growth based on data from 44 countries over 200 years with a focus on the debt-growth link during high-debt episodes.

Q&A: Carmen Reinhart on Greece, U.S. Debt and Other ‘Scary Scenarios’WSJ
Feb 2010.