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Alan Greenspan, the confidence strategy

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  • Edwin Le Heron

Abstract

To evaluate the Greenspan era, we nevertheless need to address three questions: Is his success due to talent or just luck? Does he have a system of monetary policy or is he himself the system? What will be his legacy? Greenspan was certainly lucky, but he was also clairvoyant. Above all, he has developed a profoundly original monetary policy. His confidence strategy is clearly opposed to the credibility strategy developed in central banks and the academic milieu after 1980, but also inflation targeting, which today constitutes the mainstream monetary policy regime. The question of his legacy seems more nuanced. However, Greenspan will remain ‘for a considerable period of time’ a highly heterodox and original central banker. His political vision, his perception of an uncertain world, his pragmatism and his openness form the structure of a powerful alternative system, the confidence strategy, which will leave its mark on the history of monetary policy. JEL Classification: E42, E50, E52, E58, E61, E65, N12.

Suggested Citation

  • Edwin Le Heron, 2006. "Alan Greenspan, the confidence strategy," Brazilian Journal of Political Economy, Center of Political Economy, vol. 26(4), pages 502-517.
    • Handle: RePEc:ekm:repojs:v:26:y:2006:i:4:p:502-517:id:612
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    References listed on IDEAS

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    1. Edwin Heron & Emmanuel Carré, 2006. "The Monetary Policy of the ECB and the Fed: Credibility versus Confidence, a Comparative Approach," Palgrave Macmillan Books, in: Philip Arestis & Jesus Ferreiro & Felipe Serrano (ed.), Financial Developments in National and International Markets, chapter 5, pages 77-102, Palgrave Macmillan.
    2. Nicoletta Batini & Andrew Haldane, 1999. "Forward-Looking Rules for Monetary Policy," NBER Chapters, in: Monetary Policy Rules, pages 157-202, National Bureau of Economic Research, Inc.
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    5. Edwin le Heron & Emmanuel Carre, 2006. "Credibility versus Confidence in Monetary Policy," Chapters, in: L. Randall Wray & Mathew Forstater (ed.), Money, Financial Instability and Stabilization Policy, chapter 4, Edward Elgar Publishing.
    6. Barro, Robert J. & Gordon, David B., 1983. "Rules, discretion and reputation in a model of monetary policy," Journal of Monetary Economics, Elsevier, vol. 12(1), pages 101-121.
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    8. Ben S. Bernanke, 2005. "Nomination hearing: testimony before the Committee on Banking, Housing, and Urban Affairs, U.S. Senate, November 15, 2005," Speech 152, Board of Governors of the Federal Reserve System (U.S.).
    9. Kenneth Rogoff, 1985. "The Optimal Degree of Commitment to an Intermediate Monetary Target," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 100(4), pages 1169-1189.
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    12. Walsh, Carl E, 1995. "Optimal Contracts for Central Bankers," American Economic Review, American Economic Association, vol. 85(1), pages 150-167, March.
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    Cited by:

    1. Angel Asensio, 2008. "(Post) Keynesian alternative to inflation targeting," Post-Print halshs-00335560, HAL.
    2. Angel Asensio, 2007. "Inflation targeting drawbacks in the absence of a 'natural' anchor," Post-Print halshs-00189225, HAL.

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    More about this item

    Keywords

    Monetary policy; credibility; confidence; fedspeak; uncertainty; Taylor rule;
    All these keywords.

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes
    • N12 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - U.S.; Canada: 1913-

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