John B. Taylor on the causes of global financial crisis and how to prevent future crises
Invited by CASE- Center for Social and Economic Research and BRE Bank, organizers of the BRE-CASE seminar series, Professor John B. Taylor visited Warsaw from 20-23 of June. During his visit, he gave presentations at two key events and attended meetings with CASE experts, academia, policy makers, bankers, and economic journalists.
At the first event, Dr. Taylor gave a presentation titled, The financial crisis: the causes and lessons learnt. How to prevent future crises, to members of the BRE-Bank Macroeconomic Forum, while Leszek Balcerowicz introduced and led the discussion surrounding lessons drawn from the crisis.
Professor Taylor's presentation focused on specific questions regarding the crisis, namely, (a) what caused it? (b) what prolonged it? (c) what worsened it? (d) why it spread to other countries? and (e) Why were some countries more resilient than others? According to Taylor, one should look to government interventions and actions to answer each of these questions rather than for an inherent flaw in the market economy. He warned that, "if reforms do not recognize this view, they will not reduce the chances of further crises”.
When asked about reforms currently undertaken by some European governments, Dr. Taylor replied that cuts in public spending will not stand in the way of recovery; nations face high deficits and large public debt and fixing public finances remains a high priority. What concerns Dr. Taylor is when countries like the US lack a fiscal consolidation plan.
Does the crisis experience call for a new paradigm in monetary policy? was the question Profesor Taylor addressed during an event organized jointly by CASE and the Department of the Global Economy at the Warsaw School of Economics. “Recent crises give no reason to abandon the core 'rational expectations/sticky price' model developed over the past 30 years," he concluded. Instead, there is a need to “work on 'political macroeconomics' in order to explain why policymakers did not follow the model's recommendations. Then practical solutions should follow”.
John B. Taylor is a world-renowned economist known for his research on the foundations of modern monetary theory and policy, and his experience in international economics. His research has been applied by central banks and financial market analysts around the world. He is a Professor at Stanford, a Senior Fellow at the Hoover Institute, and an author of numerous publications. [more about the speaker]
Presentations:
The financial crisis: the causes and lessons learnt. How to prevent future crises
Does the crisis experience call for a new paradigm in monetary policy?
