“The in­tu­ition be­hind some of Stiglitz’s ar­gu­ments about rigid prices is sim­ple. Threat­en­ing work­ers with the loss of their job will have no ef­fect if they can im­me­di­ately find an­other”

Financial Mirror (Cyprus) - - FRONT PAGE -

with­out re­gard to the fact that their ef­fi­cacy may de­pend on con­text.

Stiglitz’s work re­minds us of the risk of bas­ing po­lices on the as­sump­tion that in­ter­est rates rise and fall smoothly. In­stead of re­ly­ing on rules of thumb about when to raise or lower rates, we need to do some cre­ative, an­a­lyt­i­cal think­ing. In emerg­ing economies in par­tic­u­lar, there is a strong need for ex­per­i­men­tal in­ter­ven­tions to col­lect data so that we can move to more sci­en­tif­i­cally based pol­i­cy­mak­ing.

In the late 1990s, I worked with Stiglitz at the World Bank, where he served as Chief Econ­o­mist. At the time, he was en­gaged in heated de­bates about In­ter­na­tional Mon­e­tary Fund in­ter­ven­tions in East Asia. In that role, I can hon­estly say that he changed the IMF. One hopes that his in­sights con­tinue to have such an im­pact, as they en­cour­age more an­a­lyt­i­cal pol­i­cy­mak­ing at all lev­els.

Newspapers in English

Newspapers from Cyprus

© PressReader. All rights reserved.