Yglesia gives a link to the original post by Dube. Always best to go right to the source:
http://www.nextnewdeal.net/rortybomb/guest-post-reinhartrogoff-and-growth-time-debt On Thu, Apr 18, 2013 at 9:43 AM, Jim Devine <[email protected]> wrote: > after the recent critique: > from SLATE at > http://www.slate.com/blogs/moneybox/2013/04/18/arin_dube_demolishes_reinhart_and_rogoff.html > Arin Dube Demolishes Reinhart/Rogoff Causal Argument > > By Matthew Yglesias <http://www.slate.com/authors.matthew_yglesias.html> > > Posted Thursday, April 18, 2013, at 9:21 AM11 > [image: dube_rr_2_v2] > > This is not as funny as en Excel error, but Arindrajit Dube's re-analysis > of the Reinhart/Rogoff statistical work on debt:GDP ratios and growth is > actually > the most important > yet<http://www.nextnewdeal.net/rortybomb/guest-post-reinhartrogoff-and-growth-time-debt>. > What Dube does is directly investigate the causal element of their > argument, which is the one that's relevant for policy purposes. He confirms > what seems to be the common ground of everyone in this debate, namely that > there's a statistical correlation between high debt:GDP ratios and slow GDP > growth. But is that because a high ratio causes a low denominator, or > because a low denominator causes a high ratio? The theoretical argument for > the latter is strong whereas the former causal interpretation relied on > some kind of unknown dark matter. The empricial evidence for the dark > matter was supposed to be the existence of a "tipping point" when the > debt:GDP ratio reaches 90% but we've now seen that there is no such > tipping > point<http://www.slate.com/blogs/moneybox/2013/04/17/reinhart_rogoff_further_thoughts_after_reading_their_responses.html>. > What Dube has done is find empirical evidence for causation running in the > reverse direction. > > He did this "by regressing current year's [debt to] GDP [ratio] on (1) the > next 3 years' average GDP growth, and (2) last three years' average GDP > growth." You can see the plots above. The outcome is that the * > backward-looking* correlation is stronger than the *forward-looking* one. > > Long story short, there is no empirical evidence for the existence of the > relevant kind of macroeconomic dark matter and there's some empirical > confirmation of the basic theory that high-debt episodes are largely caused > by slow-growth episodes. > > Stepping back I want to make the point that it's striking that R&R didn't > even check this. I don't begrudge any academic's right to rush into > publication with an interesting empirical finding based on the assembly of > a novel and useful dataset. I don't even begrudge them the right to keep > their dataset private for a little while so they can internalize more of > the benefits. But Reinhart and especially Rogoff have spent years now > engaged in a high-profile political advocacy campaign grounded in a causal > interpretation of their empirical work that both of them knew perfectly > well was not in fact supported by their analysis. The natural step between > *interesting correlation that doesn't establish causation* and *political > advocacy campaign based on an unsupported causal inference* is *do some > further statistical work to test different causal theories*. > They just didn't do it. And as soon as the data was available, naturally > enough other people decided to try methods appropriate to interrogating the > causal issue and the causal inference R&R plainly preferred was demolished > within 24 hours. > > -- > Jim Devine / "Segui il tuo corso, e lascia dir le genti." (Go your own > way and let people talk.) -- Karl, paraphrasing Dante. > > _______________________________________________ > pen-l mailing list > [email protected] > https://lists.csuchico.edu/mailman/listinfo/pen-l > > -- Cheers, Tom Walker (Sandwichman)
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