2013-12-14
Nobel Prize laureate: prevention of asset bubbles — the basis of financial stability
The global financial crisis showed that the real estate price bubbles could have dire consequences not only for banks, but for nations as well and, finally — for all tax payers. Therefore, restructuring is necessary, which would help block new bubbles, in the words of Robert J. Shiller, an economist, current Nobel Prize laureate, and Yale University professor of Lithuanian descent.
“The financial crisis has exposed flaws in our economic systems, but there are deep underlying strengths. It is important that Lithuania remain cognizant of these strengths, and continues its process of integration into the world’s financial system,” says R. J. Shiller, who participated in a discussion, “Speculative Asset Prices and Our Broader Purposes”, which took place in Vilnius on Saturday.
In his very popular works the professor has warned about the recent U.S. real estate and, in the beginning of the last decade, technology company stock bubbles. In 2013 he was awarded the Noble Prize in Economics for empirical analysis of asset prices.
“The professor’s insight is very valuable. They are the basis for substantial change in the central banks’ approach to asset prices. Currently, around the world, the central banks’ regulation measures toolbox is being reviewed, adding tools that enable prevention of the forming of bubbles. This is the path Lithuania is on as well”, says Marius Jurgilas, Member of the Board of the Bank of Lithuania, who participated in the discussion with the Nobel Prize laureate.
According to M. Jurgilas, legislation changes have already been initiated, which would provide the Bank of Lithuania with the authorisation to perform not only supervision of separate financial institutions, but also identify, observe and assess the rising threats at the level of the country’s financial system. The so-called macro-prudential policy measures will help block newly forming bubbles and mitigate their adverse effects on the Lithuanian economy.
Marius Jurgilas, Member of the Board of the Bank of Lithuania, presented Robert J. Shiller of a coin set of three golden coins (Malvina Stankutė photo)
During the event organised by Global Lithuanian Leaders, a network of Lithuanians who have achieved career heights in Lithuania and around the world, with the assistance of the Bank of Lithuania, M. Jurgilas presented the Nobel Prize laureate of Lithuanian descent with a coin set of three golden coins dedicated to the millennium of the mention of the name of Lithuania.
Coin set of three golden coins dedicated to the millennium of the mention of the name of Lithuania (the Bank of Lithuania photo)