Global Economic Prospects 2015

The global economy is still struggling to gain momentum. Read more ...

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Submitted by Jamus Lim on
Hi Carlos, Thanks for your comment. As I understand it, you believe that the comparison made in the post is incorrect, because the relationship between growth and debt is endogenous. This is entirely true, and why in the first paragraph of the post, I pointed out that the causality problem, which poses a problem for inference. But since the non-independence of growth and debt (as you call it) is an issue that has already been repeatedly discussed (even by Reinhart and Rogoff themselves), I wanted to focus on an alternative aspect of the R-R paper, that of statistical inference. My point of the post, which hopefully came across, is that the difference in means---a fairly standard statistical test---turns out not to be statistically significant between the 30/60 and 60/90 bins, nor between the 60/90 and >90 bins. The graph was chosen to replicate the graph in R-R's original paper, with the data edits mentioned in the footnote to the table. So if the comparison rubs you the wrong way, it is an issue with how R-R make their comparisons (and inferences).