WASHINGTON, March 19 (Xinhua) -- Industrialized countries could consider greater inflation tolerance to fasten their economic recovery, the World Bank (WB)'s chief economist said on Tuesday.
"I feel increasingly that maybe there is a case for a certain amount of controlled inflation for industrialized countries," said Kaushik Basu while delivering a speech at the Center for Global Development in Washington.
He argued that the advanced countries need to strike a balance between "consumption austerity" and "fiscal profligacy" to pave the way for further growth.
Given the current situation of the world economy, he said, inflation is a way to balance out some debts of the countries. " Maybe a targeted inflation of something like 4 percent for a couple of years and then inflation is again pulled back," he suggested.
Acknowledging that inflation control is hard, Basu still held that elevated inflation for a temporary period could lift the industrialized countries a bit quicker out of the crisis.
He also noted that the crisis since 2007 reflected "tectonic" shifts in the global economy.
Basu believed that the global economic turmoil is going to last for at least two more years into early 2015. By that time, he said, some of the emerging economies would be in the "driver's seat" in terms of the global growth.