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How A Student Took On Eminent Economists On Debt Issue - And Won

Thursday, April 18, 2013 - 9:21 AM
From Reuters:
In the world of economic luminaries, it doesn't get much bigger than [...] Reinhart and Rogoff, whose work has had enormous influence in one of the biggest economic policy debates of the age.

Both have served at the International Monetary Fund. Reinhart was a chief economist at investment bank Bear Stearns in the 1980s, while Rogoff worked at the Federal Reserve, passing through Yale and MIT before landing at Harvard.

Their study, which found economic growth slows dramatically when a government's debt exceeds 90 percent of a country's annual economic output, has been cited by policymakers around the world as justification for slashing spending.

Former U.S. vice presidential candidate Paul Ryan, a Republican congressman from Wisconsin, is one influential politician who has cited the report to justify a budget slashing agenda.

Using the two professors' data, Herndon found that instead of a dramatic fall in growth, the decline was much milder, slowing to about 2.2 percent, instead of the slump to minus 0.1 percent that Reinhart and Rogoff predicted.

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We can only hope that ZIRP is a result of Ben Bernanke having made the same error as the two economists.
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pearlbrownpearlbrown1,491 posts since
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