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Abstract: Newly developed long historical time series on public debt, along with modern data on external debts, allow a deeper analysis of the cycles underlyin

by cs702 6y ago

Abstract: 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. The evidence confirms a strong link between banking crises and sovereign default across the economic history of great many countries, advanced and emerging alike. The focus of the analysis is on three related hypotheses tested with both “world” aggregate levels and on an individual country basis. First, private debt surges are a recurring antecedent to banking crises; governments quite contribute to this stage of the borrowing boom. Second, banking crises (both domestic ones and those emanating from international financial centers) often precede or accompany sovereign debt crises. Indeed, we find they help predict them. Third, public borrowing accelerates markedly ahead of a sovereign debt crisis; governments often have “hidden debts” that far exceed the better documented levels of external debt. These hidden debts encompass domestic public debts (which prior to our data were largely undocumented).

chewz 6y ago
FAQ: Reinhart, Rogoff, and the Excel Error That Changed History > 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 has been widely cited to justify budget-cutting. But the authors stand by their conclusion that higher government debt is associated with slower economic growth. Here’s what you need to know: > How big is this mistake? > Reinhart and Rogoff wrote in their 2010 paper that average annual growth was negative 0.1 percent in countries with episodes of gross government debt equal to 90 percent or more of GDP between 1945 and 2009. Liberal economists have been critical of their work for years (just economists being their usual cranky selves), but now three economists at UMass say Reinhart and Rogoff made several mistakes and omissions. According to the UMass scholars, the “corrected” number is positive 2.2 percent—which means GDP still grows, even when debt levels are very high. [1] https://www.bloomberg.com/news/articles/2013-04-18/faq-reinhart-rogoff-and-the-excel-error-that-changed-history https://www.bloomberg.com/news/articles/2013-04-18/faq-reinh...
- cs702 6y ago
  Yes. The true figure for reduced growth rate following a period of high and rising public debt probably lies within -0.1 and +2.2%, and in all likelihood closer to the latter than the former. But the somewhat arbitrary 90 percent "threshold" is looking... rather modest and quaint these days. See here: https://news.ycombinator.com/item?id=26179943 https://news.ycombinator.com/item?id=26179943

by cs702 6y ago

chewz 6y ago

FAQ: Reinhart, Rogoff, and the Excel Error That Changed History > 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 has been widely cited to justify budget-cutting. But the authors stand by their conclusion that higher government debt is associated with slower economic growth. Here’s what you need to know: > How big is this mistake? > Reinhart and Rogoff wrote in their 2010 paper that average annual growth was negative 0.1 percent in countries with episodes of gross government debt equal to 90 percent or more of GDP between 1945 and 2009. Liberal economists have been critical of their work for years (just economists being their usual cranky selves), but now three economists at UMass say Reinhart and Rogoff made several mistakes and omissions. According to the UMass scholars, the “corrected” number is positive 2.2 percent—which means GDP still grows, even when debt levels are very high. [1] https://www.bloomberg.com/news/articles/2013-04-18/faq-reinhart-rogoff-and-the-excel-error-that-changed-history https://www.bloomberg.com/news/articles/2013-04-18/faq-reinh...

cs702 6y ago
Yes. The true figure for reduced growth rate following a period of high and rising public debt probably lies within -0.1 and +2.2%, and in all likelihood closer to the latter than the former. But the somewhat arbitrary 90 percent "threshold" is looking... rather modest and quaint these days. See here: https://news.ycombinator.com/item?id=26179943 https://news.ycombinator.com/item?id=26179943