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The evidence for austerity may be based on an Excel spreadsheet error
One of the most influential intellectual justifications for the unpopular austerity measures embraced by policymakers — or imposed upon them — in the wake of the financial crisis was provided by two widely cited papers. Now, one of those papers, written in 2010 by Harvard economists Carmen Reinhart and Kenneth Rogoff, "Growth in a Time of Debt", appears discredited for making fundamental Excel coding errors, selectively excluding certain data and using debatable methods to weight the countries analysed.
The controversial paper argued that a high debt to GDP ratio at a certain cut-off point — 90 per cent — would lead to slow growth. It was cited by everyone, from Paul Ryan to Olli Rehn, the European commissioner for economic and monetary affairs and the euro, as proof that "fiscal consolidation" was necessary. Ryan's proposal for a US budget said that the study "found conclusive empirical evidence that [debt] exceeding 90 per cent of the economy has a significant negative effect on economic growth".
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