The Fed after Greenspan

Frederic Mishkin

Eastern Economic Journal, 2005, vol. 31, issue 3, 317-332

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.

Date: 2005
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