facebook
twitter
rss
account
search
search
 

U Mass study refutes Harvard study on federal debt ratio

April 16, 2013 at 8:11 PM   |   Comments

| License Photo
AMHERST, Mass., April 16 (UPI) -- A Harvard study used to justify fiscal austerity in government was flawed by mathematical and software errors, University of Massachusetts researchers said.

The Harvard study -- by economists Ken Rogoff and Carmen Reinhart -- postulated a debt-to-gross domestic product ratio above 90 percent is detrimental to the health of an economy.

The Los Angeles Times reported Tuesday Rogoff and Reinhart came up with the 90 percent threshold in a research paper in 2010 that became the basis of a book titled "This Time Is Different: Eight Centuries of Financial Folly."

The U Mass study says Rogoff and Reinhart erroneously tossed out three sample countries whose data would have taken some of the punch out of the claim, and came up with a formula for minimizing growth rates for some countries where the debt to GDP ratio was not favorable to their claim. The U Mass study asserts Rogoff and Reinhart failed to include the ratios of five countries in their final analysis, which would have made the average growth rate in their headline theory 2.2 percent, rather than minus 0.1 percent.

The U Mass researchers said if calculations had been carried out properly, it would show current debt-to-GDP ratios have a more moderate fiscal effect.

Rogoff and Reinhart, while not responding directly to the U Mass study, said Tuesday it found lower economic growth in high-public debt economies, the Times reported.

Several European governments have adopted austerity measures to replace strategies of economic stimulus, based on a fear that a high debt-to-GDP ratio cripples growth. The Rogoff-Reinhart study has been used by many proponents of austerity -- including U.S. Rep. Paul Ryan, R-Wis. -- to bolster the argument for deep federal spending cuts.

Topics: Paul Ryan
© 2013 United Press International, Inc. All Rights Reserved. Any reproduction, republication, redistribution and/or modification of any UPI content is expressly prohibited without UPI's prior written consent.
Most Popular
1
Russian currency crashes Russian currency crashes
2
Navy tests MQ-8C unmanned helos Navy tests MQ-8C unmanned helos
3
New submarine set for commissioning New submarine set for commissioning
4
SM-6 long-range interceptors on target in U.S. Navy test SM-6 long-range interceptors on target in U.S. Navy test
5
Report: U.S. on path to energy independence Report: U.S. on path to energy independence
Trending News
Around the Web
x
Feedback