Finn Kydland is one of the keynote speakers during the Lacea Lames meeting which is hosted by Universidad EAFIT and the Medellín branch of the Colombian Central Bank.
Finn Kydland, winner of the 2004 Nobel Prize in Economics, began his presentation on economic policies and growth at the Lacea Lames meeting by thanking the city for their hospitality during the past three days he’s been in Medellín. Then, addressing a full audience, he showed a comparison chart with the GDP of countries such as Mexico, Korea, Japan, United States and Ireland between 1950 and 2010 to support some of his most important theses.
The chart presented Mexico as one of the countries with the poorest growth rates; he compared this country to Chile to emphasize the importance of decisions in the banking sector: “Consistency in policies is an important factor, but not the only one. Both countries had similar economic conditions in 1981, but between 1985 and 1990, the governments made a series of decisions that changed the destiny of both nations. Mexico didn’t privatize some of its banks—or did it too late—and that was decisive for its low growth.” According to Kydland, this proves the direct relationship between good management of the banking system and the economic growth of a nation.
Likewise, he clarified that, besides the decisions concerning the banking sector, growth is also associated with movements in the business sector, regulations imposed by governments, technological changes, and the human capital.
Taking China as an example, he demonstrated that it’s not enough for governments to create sustained policies over time if their quality is not assured. “With the same resources, China could have grown much more if it hadn’t been for the very poor quality of its economic policies,” said Kydland.
Argentina was another example presented by the Norwegian Nobel Prize winner. For him, during this South American country’s most critical time, the government implemented short-term policies that had an immediate impact on the investors’ trust. Economic plans, according to him, should be long-termed to ensure an economic growth not only in the present, but also in the future.
At the end of his lecture, Kydland acknowledged that, for governments, it is difficult to implement long-term policies because they risk being interrupted, due to the need to show immediate results. However, he recommended making major efforts to keep them since that’s the best way to have a sustainable economic growth.
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