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The problem with global economy is in low productivity, not growth: John Taylor

Collected: 2016.10.13

Distributed: 2016.10.14

Source: Go Direct

The fiscal and monetary stimuli means governments and central banks have been employing to vitalize the economy ever since the 2007-2008 financial crisis have failed, and policymakers must look beyond macroeconomic actions to address low productivity and inefficient spending, said John Taylor, acclaimed economist and professor at Stanford University, the U.S.

“The problem with many countries is low productive, inefficient investment not so much as low demand, and policies preventing businesses from starting a business and creating jobs,” Taylor said in an interview with the Maeil Business Newspaper on Wednesday. He blamed wrong policymaking for the delay in global recovery.

Taylor, who is accountable for the Taylor rule - a monetary policy guideline on how much a central bank should change the interest rate in response to macroeconomic conditions - is in Seoul as a guest speaker at the 17th World Knowledge Forum.

The stimuli packages that included unconventional monetary means of $4.5 trillion bond-purchase program in the United States between 2008 and 2014 as well as other advanced economies to flood liquidity and artificially inflate demand has not “worked very well” and “will not work well” in the future, he said.

“We don’t need any more stimuli packages” in terms of boosting the demand. Instead, policymakers must change policy focus as current secular stagnation stems from low productivity, he said.

The same goes for the Korean economy also mired in a structural slowdown. He urged policymakers to continue with reforms and lift regulations with a focus on improving productivity.

By Lee Sang-duk and Kim Jung-hwan

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