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Why Reinhart & Rogoff Still Matter
May 10, 2013 at 21:00 PM EDT
By Russ Koesterich, CFA iShares Global Chief Investment Strategist Last week, my colleague Daniel Morillo wrote that investors would be remiss in writing off Reinhart and Rogoff’s larger body of work merely because of a spreadsheet error in the economists’ widely cited paper on the relationship between economic growth and debt. In my opinion, both investors and policy makers would also be remiss in writing off the influential paper itself. While Reinhart and Rogoff have publicly admitted mistakes in their methodology, their paper’s basic conclusion still holds: Excessive government debt is likely to be an impediment to a country’s growth [see Visual History Of The S&P 500]. In fact, their major finding that economic growth fell by about 1% when gross government debt-to-GDP was high has been corroborated by several other studies. This historical association between excessive debt and slower growth has three important implications for the future of the US economy and market. [...] Click here to read the original article on ETFdb.com. Related Posts: No Related Posts
By Russ Koesterich, CFA iShares Global Chief Investment Strategist Last week, my colleague Daniel Morillo wrote that investors would be remiss in writing off Reinhart and Rogoff’s larger body of work merely because of a spreadsheet error in the economists’ widely cited paper on the relationship between economic growth and debt. In my opinion, both investors and policy makers would also be remiss in writing off the influential paper itself. While Reinhart and Rogoff have publicly admitted mistakes in their methodology, their paper’s basic conclusion still holds: Excessive government debt is likely to be an impediment to a country’s growth [see Visual History Of The S&P 500]. In fact, their major finding that economic growth fell by about 1% when gross government debt-to-GDP was high has been corroborated by several other studies. This historical association between excessive debt and slower growth has three important implications for the future of the US economy and market. [...]
