Born in Poland. Left in 1970. PhD in Economics. Worked for over 30 years as international economist, specializing in emerging market economies. Followed development of PS since its inception. Thoughtful commentaries.
I do not agree that the issue is purely statistical. The important issue is a 'qualitative' aspect of deficits. What are the reasons for government running/increasing/decreasing deficits? In the recent crisis, rising deficits in Iceland and/ or Ireland are 'qualitatively' very different from those in Greece or Portugal, for example. 'Putting' all deficits into the same basket and running a regression leads to confusing results and interpretations. If rising deficits results from the cut in taxes (benefitting mostly) rich (as in the U.S before the crisis), for example, the cut in spending to reduce them would lead to serious drop in growth. The issue , at hand, is really more political than a problem of uncontrolled experiment.