Nobel Prize-winning economist Joseph Stiglitz said it would be premature for the US Federal Reserve to reduce monetary stimulus even if there is little evidence that it has helped the world’s largest economy.
“It’s the only stimulus,” the Columbia University professor said in an interview at the World Economic Forum in Jordan on Saturday. “Clearly the economy is not back to normal and to accept this as the new normal would be really wrong.”
Last week, US stocks dropped and Treasuries fell for a fourth week, the longest slide since August last year, after US Fed Chairman Ben Bernanke said on Wednesday that the US central bank may reduce the pace of asset purchases if policymakers see indications of sustained growth.
Orders for durable goods increased more than forecast last month by 3.3 percent, the US Department of Commerce said on Friday, signaling that the US economy will get a lift in the second half of the year.
The nation’s GDP may expand 2.7 percent next year, the fastest pace since 2006, according to the median estimate of 83 economists surveyed by Bloomberg.
What makes the debate over the Fed’s stimulus difficult is that “the evidence that it provided much stimulus to the economy is very weak,” Stiglitz said. “It may have contributed to asset price bubbles, it may have contributed a little bit to the weaker dollar, which actually helps US exports.”
Around the globe, governments are grappling with supporting growth while strengthening public finances in the aftermath of the 2008 financial crisis and the global recession.
As US Federal Reserve policymakers debate paring quantitative easing and austerity measures trigger protests in the 17-nation euro area, Bank of Japan Governor Haruhiko Kuroda says he see no signs of “excessively bullish expectations” in asset markets, while China’s Premier Li Keqiang (李克強) says he wants to find new growth drivers by cutting the state’s role in the economy.
Stiglitz is a former chief economist of the World Bank, and has worked as a member and chairman of the White House Council of Economic Advisers.
He won his Nobel Prize in economics in 2001.