(Updates with details, more quotes, background)
NEW YORK, Oct 14 (Reuters) - Nobel laureate economist Joseph Stiglitz on Wednesday warned against intervening in the currency market to slow the U.S. dollar's slide.
"The government has to think twice about intervening in exchange rates," Stiglitz told Reuters TV in an interview. He added that there are "fundamental reasons why the dollar is weak and trying to keep it up from where the market level is, would be very costly."
Stiglitz cited the U.S. economy's gargantuan fiscal deficit as one reason for the market's bearish stance on the dollar. The deficit was exacerbated by a slew of stimulus measures to underpin an economy in recession, and some economists have estimated the economy's net debt could reach 10 percent of the country's gross domestic product.
But Stiglitz pointed out that a weak dollar has ended up helping the U.S. economy by making it easier for U.S. companies to export. And that has been the case this year. The U.S. trade deficit in August, for instance, has narrowed, with exports rising to their highest level since December 2008.
"It (a weak dollar) does help redress global imbalances," Stiglitz said, although he noted that the decline in the dollar should be orderly if the currency's weakness is to help the economy.
In any case, Stiglitz said he doesn't believe the dollar would fall at a pace so extreme that it could lead to panic. "I don't think that will likely happen."
The last time central banks made a major coordinated effort to intervene in the currency market was in September 2000 when the Federal Reserve, Bank of England, Bank of Japan, and Bank of Canada joined forces with the European Central Bank to successfully support a beleaguered euro.
He added that while investors are worried about the country's growing debt, he believes that if the government spends its money well, "the deficit can be managed and the returns on investment can be greater than the cost of capital."
The dollar has dropped 7 percent against a basket of major currencies so far this year and on Wednesday fell to a 14-month low on expectations U.S. interest rates will stay at very low levels for some time. Low rates reduce the attractiveness of U.S. assets for global investors.
(Reporting by Fred Katayama and Gertrude Chavez-Dreyfuss; Editing by Chizu Nomiyama)