Policy-Rule Retrospective on the Greenspan Era

The recent passing of the Federal Reserve Board’s Chairmanship from Alan Greenspan to Ben Bernanke generated a deluge of commentary in the press, both inside and outside of the United States. Most of the writings were marked by a celebratory tone, presumably as a consequence of the excellent record of inflation containment and real income growth that was compiled in the United States during the 18 years of Greenspan’s tenure. There was some critical commentary, however, most notably in articles in the Economist (2006a, 2006b, 2006c) that complained about the U.S. housing price boom of recent years, the absence of any institutionalization of Greenspan’s policy-making procedures, and the manifest disregard by the Fed—as well as many other central banks—of the behavior of monetary aggregates.