Tag Archives: Public debt

Reinhart and Rogoff’s coding mistake: Much Ado About Nothing

This week saw a wide circulation of recent working paper by Thomas Herndon, Michael Ash and Robert Pollin, “Does High Public Debt Consistently Stifle Economic Growth? A Critique of Reinhart and Rogoff“, Working Paper Series Number 322, Political Economy Research Institute, University of Massachusetts Amherst. The authors challenge the findings in Carmen Reinhart and Kenneth Rogoff’s “Growth in a Time of Debt“, American Economic Review, Papers and Proceedings 100, 573-578. During their efforts to replicate Reinhart and Rogoff’s findings on the relationship between public debt and growth for 20 developed countries post-WWII, Herndon et al. received the original codes from Reinhart and Rogoff. Upon scrutiny, they discovered a coding error … Continue reading

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ECB public debt purchases by numbers

I wrote last week about the ECB’s renewed purchases of public Euro debt (in particular Spanish and Italian). Now the actual numbers are out, and the confirm what market participants signaled: The ECB was not in for a small operation. The ECB purchased for around 22 billion Euros, thereby raising its stock of debt purchased under the Securities Markets Programme to 96 billion Euros. An unprecedented increase in the stock of almost 30 %. Today, the ECB will suck up the associated liquidity created (and will do so the next week, and the next . . . ). From a weekly perspective, the operation appeared successful as bond yields have … Continue reading

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Posted in Economics, Monetary policy | Tagged , , | 1 Comment

ECB buys public debt again: Otmar Issing voices strong critique

In a rare Sunday press release (August 7) , the President of the ECB, Jean-Claude Trichet (on behalf of the Governing Council), hailed the fiscal and structural measures of Spain and Italy and their commitments—along with other member countries—to strictly adhere to “fiscal targets”. Then he emphasized that countries are sovereign states that themselves should honor their own “signature as a key element in ensuring financial stability in the euro area as a whole“. (Oh, and he supports the joint statement of the same day by France and Germany, which is not surprising given the occasional word-by-word similarities.) Then he concludes that the Securities Markets Programme (SMP) will be activated. … Continue reading

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Posted in Economics, Economists, Monetary policy | Tagged , , , , , , , , , | 2 Comments