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Reinhart, Rogoff... and Herndon

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Thomas Herndon, the UMass Amherst PHD student who discovered an Excel coding flaw in the famous paper "Growth in a Time of Debt" by economists Kenneth Rogoff and Carmen Reinhart, which had claimed that when a country's debt surpasses 90% of GDP, then growth slows precipitously, was the man of the week.

EU commissioner Olli Rehn and influential US Republican politician Paul Ryan have both quoted a 90% debt-to-GDP limit to support their austerity strategies.

Herndon proved the paper contained multiple errors, provoking widespread international interest and embarrassment for austerity policymakers.

The findings have been described as "shocking" and as having rocked the economics world, with publications such as The Washington Post having for several years subscribed to the paper as an "economic consensus view."

Reinhart and Rogoff provided a statement:

We are grateful to Herndon et al. for the careful attention to our original Growth in a Time of Debt AER paper and for pointing out an important correction to Figure 2 of that paper. It is sobering that such an error slipped into one of our papers despite our best efforts to be consistently careful. We will redouble our efforts to avoid such errors in the future. We do not, however, believe this regrettable slip affects in any significant way the central message of the paper or that in our subsequent work

 

 

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