Recently, we have seen a number of explorations of the timing of growth around episodes of high debt as a way to discern the likely direction of causality in that relationship. This is important, because we doobserve that there is a negative correlation between contemporaneous debt and growth. For instance, this is true when using the corrected data from Reinhart and Rogoff, and equal weighting of country-year observations. Although there is no evidence of tipping points, a negative relationship remains.
In a blog post in April, I showed that the timing of this negative relationship went against an interpretation where high debt caused low growth.
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