Sovereign Debt and its Implications on Growth

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The book delves into the contentious debate surrounding public debt and its impact on economic growth, particularly following the global financial crisis. It critiques the influential 2009 paper by Reinhart and Rogoff, which claimed that exceeding a 90% debt-to-GDP ratio leads to negative growth. Through a detailed analysis of data from 1955 to 2012, the author, Thomas Herndon, argues that while rising debt correlates with declining growth, the change in debt levels is more crucial than the total debt itself. This insight challenges established austerity measures in the EU.