The discovery of an error in an influential research paper by Harvard University economists Carmen Reinhart and Kenneth Rogoff has sparked an academic firestorm. It's time to sort through the wreckage.
To recap, Reinhart and Rogoff compiled an impressive collection of historical data on government-debt levels around the world. It initially covered a sample of 20 advanced economies over the postwar period, then expanded to include much of the past two centuries, as well as a separate sample of emerging markets. The data trove provided the first serious testing ground for exploring the links between levels of public debt and other things that matter for our well-being, such as financial crises and the rate of economic growth.
They measured typical economic-growth rates across countries during episodes when public-debt levels were low, medium, high or very high in relation to gross domestic product. Their conclusion: "Median growth rates for countries with public debt over roughly 90 percent of GDP are about 1 percent lower than otherwise; average (mean) growth rates are several percent lower."