Noted for April 25, 2013
New Preface to Charles Kindleberger, "The World in Depression 1929-1939"

Yes, Italy and Japan Have Low Growth and Have High Debt. So?

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Paul Krugman:

Reinhart-Rogoff, Continued: About the slow growth/debt connection: I’ve done a quick and dirty mini-RR for the period 1950-2007 (starting 1950 because that’s where the Total Economy Database starts), focusing only on the G7. If you look at the scatterplot, there does seem to be an association between high debt and slow growth. But I’ve coded the points by country — and if you look at it, you see that most of the apparent relationship is coming from Italy and Japan; Britain didn’t seem to suffer much from its high debt in the 1950s. And it’s quite clear from the history that both Italy and (especially) Japan ran up high debts as a consequence of their growth slowdowns, not the other way around.