Tom McDonnell: Reinhart and Rogoff's finding that the growth rate starts to decline once the public debt to GDP ratio exceeds 90% has become embraced as a stylised fact by the commentariat and in particular by the austerians. However, a recent paper by Thomas Herndon, Michael Ash and Robert Pollin has critiqued this finding. As Slate reports here, Herndon et al. find that the Reinhart and Rogoff result is attributable to a coding error, and they also raise other methodological objections. Herndon et al. find that overall the evidence contradicts Reinhart and Rogoff's claim that public debt loads greater than 90% of GDP consistently reduce GDP growth.
It will be interesting to see how Reinhart and Rogoff respond to the Herndon critique.
Dr Tom McDonnell
Tom McDonnell is senior economist at the NERI and is responsible for among other things, NERI's analysis of the Republic of Ireland economy including risks, trends and forecasts. He specialises in economic growth theory, the economics of innovation, the Irish and European economies, and fiscal policy. He previously worked as an economist at TASC and before that was a lecturer in economics at NUI Galway and at DCU. He has also taught at Maynooth University.
Tom obtained his PhD in economics from NUI Galway.
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