James Stock and Mark Watson wrote a paper on how the monetary policy has improved the economy. It has resulted for less than 10% of the reduction in volatility. Structural changes in the economy such as improved inventory control has also helped the economy. But as much as half of the decline in volatility was due to smaller economic changes such as oil price changes, and the results of these actions may only be temporary. .
Another paper written by Ken Rogoff, the director of research at the International Monetary Fund states that Central Bankers should not take full credit for the decline in inflation in the past twenty years. The increasing competitiveness from deregulation and globalization is a strong force in the decline of inflation. It has made prices lower and more flexible which has helped increase the Central Bank's credibility. .
The final paper was written by Claudio Borio and Bill White of the Bank of International Settlements. They said that Central Banks focus on short-term inflation pressures did not necessarily guarantee economic and financial certainty. An economy may have low inflation but a rapid growth in debt and asset prices, which occurred in the United States in the late 1990's. They also believe that the monetary policy should lean against the build-up of imbalances even if current inflation is subdued.
The European Central Bankers keep a focus on money growth and inflation to prevent an emerge of serious financial imbalances. Mervyn Kind, the Governor of the Bank of England, said monetary policy may occasionally need to be tightened during a boom in asset prices and credit even if inflation in the economy is low. An early rise in interest rates may initially increase inflation but it is healthier for the economy in the long run. Alan Greenspan, on the otherhand, believes in a "bubble effect" view on the economy. He says a mild monetary tightening might push share prices higher if it is a sign that the Central Bank is guaranteeing non-inflationary growth.