Economics
Yellen Hot Economy Seen as Growth Cure With World Bank Blessing
- World Bank chief economist Romer urges stressing the system
- He criticizes reliance on common economic models, theory
Is Something Wrong With Fed's Inflation, Jobs Model?
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World Bank Chief Economist Paul Romer urged global policy makers to run their economies hotter, driving down spare capacity and unemployment to expose longer-run obstacles to growth.
“If we could be running it much closer to full capacity, all of the shortages, bottlenecks and constraints” would surface, Romer said in an interview Thursday in Washington. That would allow policy makers to zero in on the next steps for raising the economy’s potential to grow, he said. “If you artificially stress the system, you actually improve it more rapidly.”