Randy Wray — The Absolutely Final and Definitive Destruction of Reinhart And Rogoff

Two UMKC students have provided what I think is the most destructive empirical work to date on the simply awful book and articles by Reinhart and Rogoff that purported to find a magical debt ratio beyond which economic growth plummets to negative territory. They are Matthew Berg and Brian Hartley and their piece is at New Economic Perspectives:

Before presenting a quick summary of their findings, let me make two preliminary notes. First they validate what Yeva Nersisyan and I first pointed out three years ago: the crappy empirical research of Reinhart and Rogoff was driven by a small number of outliers, and by confusion of causation and correlation. Yes, some countries–Japan most notably–have high debt ratios and slow growth. R&R aggregated in such a way as to give very high weights to those countries. And those countries had high deficits and thus high accumulated debts because growth was low. Hence, there was never any support for their claim that 90% marks a causal turning point.

Economonitor — Great Leap Forward
The Absolutely Final and Definitive Destruction of Reinhart And Rogoff
L. Randall Wray | Professor of Economics, UMKC

Randy's definitive statement on MMT and the claim that MMT says deficits don't matter. 

But note that no UMKC-affiliated faculty member (and probably no student) has ever said something as silly as “no deficit can be bad”. I do not even know what that could mean. Deficits can be bad. Very bad. Very very bad. A sovereign country that issues its own currency cannot be forced into involuntary default so long as it floats its currency. That is certainly a true statement–accepted by anyone who knows anything about sovereign currencies. Whether it is talmudic I have no idea. If you’ve got the magic porridge pot, you can provide the porridge.

Can too much porridge be bad? You betcha–just read the damned story. Inflation? Yes. Currency depreciation? Probably. Leave too few resources for the private purpose? No doubt. Create a nation of couch potatoes? You’ve got it. Bury everything under a thick layer of suffocating porridge? Read the story.

Where do people like Epstein get this stuff? I have no idea.

Dylan Matthews — Inside the offbeat economics department that debunked Reinhart-Rogoff

It’s easy to overestimate the differences between UMass and more mainstream departments. The empirical microeconomics Dube does is not too different from what David Card, David Autor, Raj Chetty, and other macroeconomists in more mainstream departments do. Pollin helped the Department of Energy implement the green portions of the stimulus, which was designed initially by mainstreamers like Larry Summers. And even the “left Keynesians” of Amherst don’t go as far as some of their peers at, say, the University of Missouri – Kansas City in dismissing the possibility of high deficits leading to inflation later on.

“It’s almost a talmudic claim that since no country with its own currency can go bankrupt, no deficit can be bad,” Epstein says. “They’ve made important contributions, and a lot of them are my friends, but we try to look at things more critically and not assume there are absolutes.”

But the department’s radical openness to alternate perspectives still sets it apart. “Learn from Marx, learn from Keynes, learn from Hayek,” Pollin says. “One of the biggest influences on me personally was Milton Friedman. He was very engaged with real world questions, and he made no bones about his ideological predilections.”

The Washington Post — Wonkblog

Inside the offbeat economics department that debunked Reinhart-Rogoff
Dylan Matthews