The advanced world already has experienced one unpleasant set of circumstances that is more common to emerging economies: structural rather than cyclical headwinds to economic recovery. Now some of these developed economies may be about to experience another unfamiliar form of disruption. The Bank of Japan’s evolving experience should serve as an important warning sign that central banks should take seriously the risk of growing policy ineffectiveness.
Mohamed El-Erian is chief economic advisor at Allianz SE.