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RI must prepare to face crisis: Stiglitz
Nobel Laureate economist Joseph Eugene Stiglitz warns that emerging economies, including Indonesia, must be ready to face possible global economic crisis in the future
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obel Laureate economist Joseph Eugene Stiglitz warns that emerging economies, including Indonesia, must be ready to face possible global economic crisis in the future.
Stiglitz conveyed the message to Bank Indonesia's assistant director for economic and monetary policy department, Muslimin Anwar, after attending the fifth Lindau Meeting on Economic Sciences in Lindau, Germany from Aug. 20 to Aug. 23, Antara reported.
Muslimin, who represented Indonesia in the meeting of world economists and Nobel winners, said that he agreed with Stiglitz.
Muslimin cited Stiglitz, the 2011 Nobel winner, who said that developed countries should not only consider their domestic economic interests in deciding their economic policies, as it had been proven during the last decade that the policies of advanced economies had brought negative impacts to the world economy.
Included among the impacts was the sub-prime mortgage case in the US in 2008 and financial and fiscal crisis in Europe that had occurred since 2010 and caused imbalances in the world's economy.
Muslimin further said he also agreed with Stiglitz that Indonesia should work on various domestic tasks, especially on structural reform, by increasing export competitiveness and economic sovereignty to bring the country's current account deficit back into a healthy direction.
According to Stiglitz, emerging countries like Indonesia will likely suffer bad impacts from the US Federal Reserve's monetary policy, if the Fed fund rate is increased in the future.
Therefore, he said, Indonesia needed to consider the use of capital control and to apply a good capital control management technique.
Stiglitz said it was likely that the Fed would not increase its fund rate in the near future.
Many experts have predicted that the Fed will increase its benchmark interest rate in the second quarter of 2015. However, Stiglitz said he was sure the Fed would maintain a low interest rate.
Stiglitz went on to say that emerging economies with huge foreign exchange reserves and well-managed capital accounts would be in a beneficial position when facing various global economic pressures, such as an increased Fed fund rate and even global economic crisis. (put/ebf)
