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Fischer Defends Reinhart, Rogoff Against Attacks

Bank of Israel Governor Stanley Fischer
Stanley Fischer, governor of the Bank of Israel, speaks during a Bloomberg Television interview at the International Monetary Fund (IMF) and World Bank Group Spring Meetings in Washington, D.C. on April 18, 2013. Photographer: Andrew Harrer/Bloomberg

June 4 (Bloomberg) -- Bank of Israel Governor Stanley Fischer defended Harvard University economists Carmen Reinhart and Kenneth Rogoff against criticism from fellow academics.

A 2010 paper by Reinhart and Rogoff used to justify austerity in the U.S. and Europe is at the center of a storm in economics and policy making after flaws were revealed. While acknowledging mistakes, Reinhart and Rogoff say their basic findings hold and last week accused Nobel laureate Paul Krugman of “spectacularly uncivil behavior” in his critique.

“The attack on these two outstanding economists is completely wrong, unfair and unacceptable,” Fischer said in a speech today to economists in Tel Aviv, without mentioning the critics by name. “You can’t behave this way.”

Reinhart and Rogoff last week hit back at Krugman for asserting in an article published in the New York Review of Books that they had withheld data from their research. Krugman then said the two have done little to dispel what he called a misconception generated by their paper -- that economies falter when debt levels exceed 90 percent of gross domestic product.

Fischer and Krugman both taught at the Massachusetts Institute of Technology in the 1980s and 1990s. Krugman is now a professor at Princeton University and in February said Fischer would be “highly qualified” to lead the Federal Reserve.

No Love

Fischer, who spoke at an Israel Economic Association meeting, said he is often helped by his knowledge of central-banking history, since lessons from the past can aid in framing current policy. Federal Reserve Chairman Ben S. Bernanke’s familiarity with the lessons of the Great Depression led him to make different policy choices in the current crisis, with a better outcome for the U.S. economy, he said.

Fischer said that Reinhart and Rogoff have made an “important contribution” to understanding the connection between various historical financial crises. While economists have frequently disagreed, they have kept their disputes civil and should do so for the good of the discipline, he said.

“There wasn’t a lot of love between the leaders of the various camps in economics in the U.S., but arguments of this kind didn’t occur,” Fischer said. “They don’t contribute anything to scientific advancement and it’s a shame.”

Reinhart and Rogoff acknowledged on April 17 that they had inadvertently left some data out of their calculations in the study, in response to a paper questioning their methods released on April 15 by researchers from the University of Massachusetts at Amherst. Still, the error didn’t change the thrust of their research, the Harvard economists said.

“Growth in a Time of Debt” concluded that countries with public debt greater than 90 percent of GDP suffered measurably slower economic growth. It has been cited by U.S. House Budget Committee Chairman Paul Ryan and European Union Economic and Monetary Affairs Commissioner Olli Rehn in defense of their arguments against high budget deficits.

To contact the reporters on this story: Alisa Odenheimer in Jerusalem at; Simon Kennedy in London at

To contact the editor responsible for this story: Andrew J. Barden at

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