I found the hype surrounding the Reinhart-Rogoff ‘error’ really confusing — mostly due to the fact that there was no break-down of the differences between the HAP and R+R results.
The HAP paper has the breakdown in a table at the back.
So what’s the low down? There’s basically nothing in it — it’s a beat up. An excel error lowered high debt growth by 30bps, and boosted low debt growth by 10bps to 20bps (see p7).
“This spreadsheet error, compounded with other errors, is responsible for a -0.3 percentage- point error in RR’s published average real GDP growth in the highest public debt/GDP category. It also overstates growth in the lowest public debt/GDP category (0 to 30 percent) by +0.1 percentage point and understates growth in the second public debt/GDP category (30 to 60 percent) by +0.2 percentage point.”
Correcting a transcription added another 10bps to ‘high debt’ growth. Correcting these two errors yields a low debt-high debt growth spread of 370bps, down from 420bps in RR AER 2010.
The other ‘differences’ amount to a difference of opinion about the best summary measure. RR say that it’s okay to take the average of averages, and HAP say that’s odd, and not allowed.
The WSJ has a handy table that allows you to see right away that it basically comes down to what you think the best measure of central tendency is — mean or median.
What all studies agrees is that high debt countries grow more slowly than low debt countries. The difference in the median estimates (and the non averaged means in HAP) all tell the same story — more debt means less growth (probably because it means more taxes and intrusive regulation — the productivity ‘miracle’ is 10bps per month, a gain that’s easily crushed by economic and political noise).