Tsdc spending Core neg shell



Download 142.58 Kb.
Page7/8
Date18.08.2018
Size142.58 Kb.
1   2   3   4   5   6   7   8

Internal Link

No Internal – General

No set threshold where debt impacts GDP


Pescatori 14 [Andrea, Economist at the Research Department of the IMF, former fellow at the Bank of Italy and Economist at the Federal Reserve Bank of Cleveland, Ph.D. in economics (Universitat Pompeu Fabra in Barcelona, Spain), this report was coauthored by Damiano Sandri and John Simon (1st is an economist at the IMF and has an M.A. and PhD in Economics from the Johns Hopkins University + 2nd has a PhD from MIT and is a Senior Economist at the IMF), “Debt and Growth: Is There a Magic Threshold?” WP/14/34, 2014, IMF, http://www.imf.org/external/pubs/ft/wp/2014/wp1434.pdf]
Is there a particular threshold in the level government debt above which the medium-term growth prospects are dramatically compromised? The answer to this question is of critical importance given the historically high level of public debt in most advanced economies. Yet there is currently no agreement on the answer and it is the subject of heated academic and political debate. One camp has argued that high levels of debt are associated with particularly large negative effects on growth. For example, an influential series of papers by Reinhart and Rogoff (2010, 2012) argues that there is a threshold effect whereby debt above 90 percent of GDP is associated with dramatically worse growth outcomes. An opposing perspective is advanced by those who dispute the notion that there is a clear debt threshold above which debt sharply reduces growth and raise endogeneity concerns whereby weak growth is the cause of particularly high levels of debt. Thus, according to this view, the priority should be increasing growth rather than reducing debt and, consequently, that much less short-term fiscal austerity is appropriate. This paper makes a contribution to the debate by presenting new empirical evidence based on a different way of analyzing the data and a sizeable dataset. Our methodology is based on the analysis of the relation between debt and growth over longer periods of time that has the potential to attenuate the concerns of reverse causality from growth to debt. Our results do not identify any clear debt threshold above which medium-term growth prospects are dramatically compromised. On the contrary, the association between debt and medium-term growth becomes rather weak at high levels of debt, especially when controlling for the average growth performance of country peers. We also find evidence that the debt trajectory can be just as important, and possibly more important, than the level of debt in understanding future growth prospects. Indeed, countries with high but declining levels of debt have historically grown just as fast as their peers. We also find, however, that high levels of debt are weakly associated with higher output volatility. This suggests that high levels of debt may still be associated with market pressure or fiscal and monetary policy actions that, even if they do not have particularly large negative effects on medium-term growth, destabilize it.

A2 Boccia I/L (1NC Shell)

Study massively flawed – trashes validity of austerity supporters


Herndon 13 [Thomas, Graduate student in economics UMass Amherst, “Does High Public Debt Consistently Stifle Economic Growth? A Critique of Reinhart and Rogoff,” Political Economy Research Institute, April, http://www.peri.umass.edu/fileadmin/pdf/working_papers/working_papers_301-350/WP322.pdf]
We replicate Reinhart and Rogoff (2010a and 2010b) and find that coding errors, selective exclusion of available data, and unconventional weighting of summary statistics lead to serious errors that inaccurately represent the relationship between public debt and GDP growth among 20 advanced economies in the post-war period. Our finding is that when properly calculated, the average real GDP growth rate for countries carrying a public-debt-to-GDP ratio of over 90 percent is actually 2.2 percent, not -0.1 percent as published in Reinhart and Rogoff. That is, contrary to RR, average GDP growth at public debt/GDP ratios over 90 percent is not dramatically different than when debt/GDP ratios are lower. We also show how the relationship between public debt and GDP growth varies significantly by time period and country. Overall, the evidence we review contradicts Reinhart and Rogoff's claim to have identified an important stylized fact, that public debt loads greater than 90 percent of GDP consistently reduce GDP growth.

RR’s permeation into austerity defenders means you reject all their evidence – forms the basis for all other authors’ assumptions


Herndon 13 [Thomas, Graduate student in economics UMass Amherst, “Does High Public Debt Consistently Stifle Economic Growth? A Critique of Reinhart and Rogoff,” Political Economy Research Institute, April, http://www.peri.umass.edu/fileadmin/pdf/working_papers/working_papers_301-350/WP322.pdf]
According to Reinhart's and Rogoff's website,1 the findings reported in the two 2010 papers formed the basis for testimony before the Senate Budget Committee (Reinhart, February 9, 2010) and a Financial Times opinion piece \Why We Should Expect Low Growth amid Debt"(Reinhart and Rogo , January 28, 2010). The key tables and figures have been reprinted in additional Reinhart and Rogo publications and presentations of Centre for Economic Policy Research and the Peter G. Peterson Institute for International Economics. A Google Scholar search for the publication excluding pieces by the authors themselves finds more than 500 results.2 The key findings have also been widely cited in popular media. Reinhart's and Rogoff's website lists 76 high-profile features, including The Economist, Wall Street Journal, New York Times, Washington Post, Fox News, National Public Radio, and MSNBC, as well as many international publications and broadcasts. Furthermore, RR 2010a is the only evidence cited in the \Paul Ryan Budget" on the consequences of high public debt for economic growth. Representative Ryan's \Path to Prosperity" reports A well-known study completed by economists Ken Rogoff and Carmen Reinhart con forms this common-sense conclusion. The study found conclusive empirical evidence that gross debt (meaning all debt that a government owes, including debt held in government trust funds) exceeding 90 percent of the economy has a significant negative effect on economic growth. (Ryan 2013 p. 78) RR have clearly exerted a major influence in recent years on public policy debates over the management of government debt and fiscal policy more broadly. Their findings have provided significant support for the austerity agenda that has been ascendant in Europe and the United States since 2010

Their errors are enough to flaw public policy and demand rejection of austerity


Herndon 13 [Thomas, Graduate student in economics UMass Amherst, “Does High Public Debt Consistently Stifle Economic Growth? A Critique of Reinhart and Rogoff,” Political Economy Research Institute, April, http://www.peri.umass.edu/fileadmin/pdf/working_papers/working_papers_301-350/WP322.pdf]
The influence of RR's findings comes from its straightforward, intuitive use of data to construct a stylized fact characterizing the relationship between public debt and GDP growth for a range of national economies. However, this laudable effort at clarity notwithstanding, RR has made significant errors in reaching the conclusion that countries facing public debt to GDP ratios above 90 percent will experience a major decline in GDP growth.9 The key identified errors in RR, including spreadsheet errors, omission of available data, weighting, and transcription, reduced the measured average GDP growth of countries in the high public debt category. The full extent of those errors transforms the reality of modestly diminished average GDP growth rates for countries carrying high levels of public debt into a false image that high public debt ratios inevitably entail sharp declines in GDP growth. Moreover, as we show, there is a wide range of GDP growth performances at every level of public debt among the 20 advanced economies that RR survey. RR's incorrect stylized fact has contributed substantially to ensuring that \traditional debt management issues should be at the forefront of public policy concerns" (RR 2010a p. 578). Specifically, RR's findings have served as an intellectual bulwark in support of austerity politics. The fact that RR's findings are wrong should therefore lead us to reassess the austerity agenda itself in both Europe and the United States



Download 142.58 Kb.

Share with your friends:
1   2   3   4   5   6   7   8




The database is protected by copyright ©sckool.org 2020
send message

    Main page