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The Fed after Greenspan

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  • Frederic S. Mishkin

Abstract

Because extending his term beyond 2006 would require a change in the Federal Reserve Act, Alan Greenspan will be stepping down from the chairmanship of the Board of Governors of the Federal Reserve next year. Under his leadership, the Federal Reserve has achieved extraordinary economic performance: inflation has become low and stable and is now consistent with Greenspan's famous definition of price stability: when households and businesses need not factor expectations of changes in the average level of price in their decisions. The first part of this article describes the hallmarks of the Greenspan Fed and the advantages of this strategy that have produced such favorable economic outcomes. Then it will look at how well the Fed might do after Greenspan and what challenges it might face. This discussion will then lead naturally to suggestions for how the Fed should operate in the future to continue the excellent performance it has achieved under Greenspan.

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File URL: http://college.holycross.edu/RePEc/eej/Archive/Volume31/V31N3P317_332.pdf
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Bibliographic Info

Article provided by Eastern Economic Association in its journal Eastern Economic Journal.

Volume (Year): 31 (2005)
Issue (Month): 3 (Summer)
Pages: 317-332

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Handle: RePEc:eej:eeconj:v:31:y:2005:i:3:p:317-332

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References

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  1. Arturo Estrella & Frederic Mishkin, 1998. "Rethinking the role of NAIRU in monetary policy: implications of model formulation and uncertainty," Research Paper 9806, Federal Reserve Bank of New York.
  2. Gauti B. Eggertsson & Michael Woodford, 2003. "The Zero Bound on Interest Rates and Optimal Monetary Policy," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 34(1), pages 139-235.
  3. Taylor, John B, 1979. "Estimation and Control of a Macroeconomic Model with Rational Expectations," Econometrica, Econometric Society, vol. 47(5), pages 1267-86, September.
  4. Takatoshi Ito & Frederic S. Mishkin, 2004. "Two Decades of Japanese Monetary Policy and the Deflation Problem," NBER Working Papers 10878, National Bureau of Economic Research, Inc.
  5. Kenneth N. Kuttner & Adam S. Posen, 2003. "The Difficulty of Discerning What's Too Tight: Taylor Rules and Japanese Monetary Policy," Working Paper Series WP03-10, Peterson Institute for International Economics.
  6. Frederic S. Mishkin, 1991. "Asymmetric Information and Financial Crises: A Historical Perspective," NBER Chapters, in: Financial Markets and Financial Crises, pages 69-108 National Bureau of Economic Research, Inc.
  7. Alesina, Alberto & Summers, Lawrence H, 1993. "Central Bank Independence and Macroeconomic Performance: Some Comparative Evidence," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 25(2), pages 151-62, May.
  8. Gauti B. Eggertsson, 2003. "How to Fight Deflation in a Liquidity Trap: Committing to Being Irresponsible," IMF Working Papers 03/64, International Monetary Fund.
  9. Ben S. Bernanke & Otmar Issing & Donald L. Kohn, 2004. "Panel discussion: inflation targeting," Review, Federal Reserve Bank of St. Louis, issue Jul, pages 165-183.
  10. Charles A.E. Goodhart, 2001. "Monetary transmission lags and the formulation of the policy decision on interest rates," Review, Federal Reserve Bank of St. Louis, issue Jul, pages 165-186.
  11. Kydland, Finn E & Prescott, Edward C, 1977. "Rules Rather Than Discretion: The Inconsistency of Optimal Plans," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 473-91, June.
  12. Calvo, Guillermo A, 1978. "On the Time Consistency of Optimal Policy in a Monetary Economy," Econometrica, Econometric Society, vol. 46(6), pages 1411-28, November.
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Cited by:
  1. Frederic S. Miskin & Klaus Schmidt-Hebbel, 2007. "Does Inflation Targeting Make a Difference?," Central Banking, Analysis, and Economic Policies Book Series, in: Frederic S. Miskin & Klaus Schmidt-Hebbel & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Se (ed.), Monetary Policy under Inflation Targeting, edition 1, volume 11, chapter 9, pages 291-372 Central Bank of Chile.
  2. Anthony Kyereboah-Coleman, 2012. "Inflation targeting and inflation management in Ghana," Journal of Financial Economic Policy, Emerald Group Publishing, vol. 4(1), pages 25-40, April.

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