Following economist Robert Shiller's warning on pricey valuations in financial markets, fellow Nobel Prize winner Lars Peter Hansen has said uncertainty surrounding regulation is hindering already "stunningly sluggish" U.S. economic growth.
Too much attention has been devoted to monetary policy and uncertainty on regulation has left institutions guessing, which has led to caution among investors, the University of Chicago economist warned.
Investors need to "jolt" themselves and get involved in new projects, he said.
"It has been a stunningly sluggish recovery from this recession. I really think in the U.S. at least there has been too much attention devoted to monetary policy as the key to fixing up problems, going forward I think the challenges we face in financial market oversight uncertainties are potentially much more critical," Hansen told CNBC.
Both professors Shiller and Hansen are winners of the 2013 Nobel Prize in Economic Sciences for their "empirical analysis of asset prices." Hansen's colleague Eugene Fama was also awarded the prize.
Earlier this week Shiller said stocks, bonds and housing might all be getting too expensive, warning of "instability in the world economy."
"I think the uncertainty that institutions on what kind of regulatory environment there is going to be in the next few years is contributing to caution and contributing to caution in a way that is going to be counterproductive. I think clarity in policy is really critical in terms of getting investment stronger," Hansen added.