Asset prices pricing in era of slow growth: Prof Spence

In an interview with CNBC-TV18, Nobel Laureate Professor Michael Spence of NYU talked about what he believes is happening to asset classes around the world and why he believes that the ongoing volatility is here to stay for a while.

In different places you need different policies, structural reforms, tax policy reforms, fiscal consolidation and so on and that wasn’t happening, at least it was not happening very fast and so the growth has turned out to be systematically disappointing.

At some point it seems to me and you never know exactly when the recognition of the lower growth and the effect on corporate earnings somehow would get reflected in asset prices and that seems to be what is going on now.

In addition there is a great deal of volatility because there is a lot of uncertainty especially from outside - people don't see easily and transparently and through the Chinese economy which is big and systemically important. They have made kind of clumsy policy mistakes with respect to the stock markets and to some extent, the exchange rate and the communication has been reasonably ineffective as well.