This was my most popular post in 2013.
There has been a lot of discussion today on Reinhart and Rogoff’s work on Debt to GDP & future economic growth (see Mike Konczal, Krugman, CEPR, Brad Plumer, and the original critique from Herden, Ash, Pollin), so I wanted to highlight some work on this issue that I put together when helping Brad Delong and Laura Tyson on an IMF presentation on fiscal policy after the crisis.
I pulled data from R&R’s AER paper on debt to GDP and economic growth to see if there is any evidence of a break at a 90. Here are three preliminary conclusions and supporting graphs:
- Persistently 90+ Public Debt to GDP countries tend to grow less quickly over next 5 years, but the distribution of historical outcomes suggests that disaster scenarios are much less common than modestly slower 5 year growth for these countries.
- Nonparametric graphs of Public Debt…
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