Tuesday, April 16, 2013

How not to Excel at economic research

Turns out that that the widely cited work of Reinhart and Rogoff alleging an adverse impact of high national debt on economic growth suffered from some serious errors, including an incorrect cell range reference in an Excel spreadsheet.

I won't comment here on the substance of the debate, nor on whether R&R have provided an adequate response to their critics. But I would like to draw attention to one lesson I draw from the whole kerfuffle, and that is that Excel spreadsheets, whatever their virtues, are ill-suited to careful data work. R&R's mistake is a case in point. It is simply too easy to introduce errors in cell ranges and references in Excel, and way too hard to replicate results. This is not to say that scripts in SAS, Stata, or R are foolproof... far from it. But this kind of mistake, where part of the sample is left out inadvertently, would be quite unlikely, I think. Furthermore, Excel is ill-suited to sensitivity and specification checks. In smallish samples like the ones R&R are dealing with, sensitivity checks are essential.

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