The economic theory underpinning austerity policies being followed by governments world wide may be flawed.
That is the allegation made in a study by the University of Massachusetts. It claims to have found coding errors on the Excel spreadsheet used by the academics who produced the theory which could invalidate their conclusions.
It was economists Kenneth Rogoff and Carmen Reinhart who found that economic growth normally slows when a government’s debt exceeds 90 percent of the country’s annual economic output.
The observation and the subsequent conclusion that countries must cut public spending has meant hardship for millions.
Policy makers around the world have imposed austerity measures in a desperate bid to ensure a growing economy. However analysts do not expect governments to the discard the theory as the saying ‘You should not spend more than you earn’ rings true.
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