Deficit Fantasies in the Great Recession
Long before the
recent controversy, INET Director of Research Projects Tom Ferguson and INET Executive Director Rob Jonhnson produced a paper titled “A World Upside Down?: Deficit Fantasies in the Great Recession,” which adressed both the Reinhart and Rogoff research and the Alesina paper on so-called expansionary contraction.
Ferguson and Johnson show that the RR data from the “Growth in a Time of Debt” paper excludes Britain’s industrial revolution, where Britain had Debt/GDP ratios of over 200% and still maintained high growth rates.
Figure 1 (reproduced below) shows the graph for the British data, which contradicts RR’s conclusions in “Growth in a Time of Debt.”
The full paper from Ferguson and Johnson is attached below.