So I already blew one gasket over Reinhart and Rogoff’s Project Syndicate piece, and now the time has come to blow the other. Turns out Francisco Rodríguez over at Bank of America was just as suspicious as I was of their claims, but being a proper economist went back to their database to check.
Turns out that, even leaving aside the claim that Venezuela is in legal default (which it’s not) their statement that domestic default leads to an “almost one” probability of external default isn’t borne out by their data!
Only 71% of countries in legal domestic default (which Venezuela is not) incur external default. And that’s working from R&R’s own database! And of countries in the kinds of “de facto” default (which is what Venezuela is in), just over a third (34%) end up in external default.
This whole thing is quickly acquiring the hallmarks of an academic train-wreck.