Achieving Price Stability: A Symposium Sponsored by the Federal Reserve Bank of Kansas City

by Alan Greenspan

Central banks throughout the world have come to recognize the importance of price stability to the long-run health and prosperity of their economies. While countries and their central banks are embracing price stability as a primary long-term goal for monetary policy, they are adopting a variety of strategies to achieve it. Some banks, for example, have adopted explicit inflation targets. In other cases, institutional structures such as currency boards and monetary union have been suggested as vehicles for achieving and maintaining price stability. To gain a better understanding of how central banks can best reduce inflation and what policies and operating procedures should be implemented to maintain price stability, the Federal Reserve Bank of Kansas City sponsored a symposium entitled "Achieving Price Stability," held at Jackson Hole, Wyoming, on August 29-31, 1996. A distinguished group of central bankers, academics, and financial market representatives shared their views and research results on this important monetary policy issue. The papers, commentary, and discussions at the symposium were substantive and informative. We hope these proceedings will contribute to a better understanding of how central banks can best achieve and maintain price stability. As recognized by all conference participants, price stability is monetary policy's major contribution toward maximizing long-run economic growth and, ultimately, raising standards of living. The opening remarks are by Alan Greenspan, Chairman of the Board of Governors of the Federal Reserve System.

388 pages, Paperback

First published November 1, 2001

About the author

Alan Greenspan is an American economist who served as the 13th chairman of the Federal Reserve from 1987 to 2006. He worked as a private adviser and provided consulting for firms through his company, Greenspan Associates LLC.
First nominated to the Federal Reserve by President Ronald Reagan in August 1987, he was reappointed at successive four-year intervals until retiring on January 31, 2006, after the second-longest tenure in the position, behind only William McChesney Martin. President George W. Bush appointed Ben S. Bernanke as his successor. Greenspan came to the Federal Reserve Board from a consulting career. Although he was subdued in his public appearances, favorable media coverage raised his profile to a point that several observers likened him to a "rock star". Democratic leaders of Congress criticized him for politicizing his office because of his support for Social Security privatization and tax cuts.
Many have argued that the "easy-money" policies of the Fed during Greenspan's tenure, including the practice known as the "Greenspan put", were a leading cause of the dot-com bubble and subprime mortgage crisis (the latter occurring within a year of his leaving the Fed), which, said The Wall Street Journal, "tarnished his reputation". Yale economist Robert J. Shiller argues that "once stocks fell, real estate became the primary outlet for the speculative frenzy that the stock market had unleashed". Greenspan argues that the housing bubble was not a result of low-interest short-term rates but rather a worldwide phenomenon caused by the progressive decline in long-term interest rates – a direct consequence of the relationship between high savings rates in the developing world and its inverse in the developed world.