Korean-American economist calls for `zero interest rate` in S. Korea

A renowned Korean-American economist said Friday that South Korea`s central bank should lower its key interest rates to a level "close to zero."

"The South Korean economy has entered a low-growth era," said Sohn Sung-won, professor of economics at California State University Channel Islands. "To break through the situation, the government should implement an aggressive policy enduring fiscal deficits, while the Bank of Korea should aggressively lower its interest rates to a level close to zero."

Sohn, a former member of the U.S. President`s Council of Economic Advisors under the Nixon administration and executive vice president at Well-Fargo, made the remarks at a meeting with Korean reporters in New York. "Every economic policy should be weighed in terms of cost and benefits. Such aggressive policies provide more benefits that costs," he stressed. He added that Seoul has enough room to implement budget-deficit policies.

Regarding exchange rates, he said that he was not concerned about South Korea`s large global corporations. "Rather, it is small and medium-sized companies that are hardest-hit by slumping exports," Sohn said. "The government should pay attention to exchange rates involving not only the U.S. dollar but also the Japanese yen and the Chinese yuan."

"One of things that the Park Geun-hye administration is doing the best and catches birds with one stone is the regulatory reform," he noted. "Regulatory reforms promote economic growth without additional costs, and that leads to increased tax revenues and, ultimately, greater fiscal strength to spare." He emphasized that the South Korean government should show its companies and people the substantial effects of deregulation.