This analysis addresses changing views of the role and effectiveness of monetary policy, inflation targeting as an "effective monetary policy," monetary policy and short-run (output) stabilization, and problems in implementing a short-run stabilization policy.

This article examines the economic environments in which past U.S. stock market booms occurred as a first step toward understanding how asset price booms come about and whether monetary policy should be used to defuse booms. The authors identify several episodes of sustained rapid rises in...

This article was originally presented as a speech at the University of Washington, Seattle, Washington, October 4, 2005.