Influential economists acknowledge errors in debt paper

Monday, 22 April 2013 00:00 - - {{hitsCtrl.values.hits}}

Reuters: Two eminent Harvard economists last week acknowledged errors in a study that has been cited by policymakers around the world as justification for government austerity campaigns, but said the “central message” of their research held nonetheless.

The 2010 study by Carmen Reinhart and Kenneth Rogoff found economic growth throughout modern history has slowed dramatically when a government’s debt exceeds 90% of a country’s annual economic output.

But a team of researchers from the University of Massachusetts at Amherst, in a new study, found spreadsheet coding errors in Reinhart and Rogoff’s work that accentuated the reduction in growth among highly indebted countries.

“It is sobering that such an error slipped into one of our papers despite our best efforts to be consistently careful,” Reinhart and Rogoff said in a statement.

The Harvard researchers’ work, including the seminal 2010 paper, has been one of the key intellectual touchstones in a move toward austerity in many advanced nations. The research has been cited by officials in the United States, the European Union and elsewhere as justification for tackling budget deficits.

However, while the two Harvard economists said the errors were regrettable, they did not change the message of their research.

Even though the spreadsheet mistakes significantly reduced the researchers’ calculations for the average rate of growth in highly indebted countries, the errors were not present in calculations of the median rates of growth, which also were slower in countries with heavy debts.

“We do not ... believe this regrettable slip affects in any significant way the central message of the paper,” Reinhart and Rogoff said.

The University of Massachusetts researchers also criticized Reinhart and Rogoff for omitting data from several countries. The Harvard researchers said on Wednesday that the data for these countries was unavailable when they first published their research, but that they subsequently added it to their public database.