Allen secured a £15m move from the Welsh outfit to the Reds last week after starring alongside Taylor at the Olympic Games.
The 22-year-old will be reunited with his old Swans boss Brendan Rodgers, and Taylor is confident that the Anfield chief with get the best out of the Wales international.
"He's definitely good enough. £15m is a great price for him if you're asking me," Taylor told talkSPORT. "If you ask any of the boys that have seen him in Team GB as well, away from Swansea themselves, they'll agree that he was one of the players of our tournament.
"He's exactly like a foreign centre midfielder he really is. From playing with him day in and day out he has got that foreignness about him in the way he plays and he's got that little bit of edge which you need in centre midfield.
"He's a great signing for Liverpool and Brendan knows him so well and gets the best out of him so it is a great signing for Liverpool."
Allen is Liverpool's second signing of the summer, with Rodgers already adding Fabio Borini to the squad.