ABSTRACT
The years from 1985 to a point early in the new century are known as the Great Moderation. Alan Greenspan succeeded Paul Volcker as chairman of the Fed in 1987, and Bernanke thinks that stable monetary policy played an important role in the Great Moderation by maintaining the low inflation rate that had been achieved by 1983 and 1984. Real gross domestic product growth resumed in 1992, and the unemployment rate started declining in 1993. Monetary policy focused on keeping inflation low by restraining the growth of the money supply and pushing the federal funds rate from the low 3.02 percent in 1993 up to over 5.3 percent from 1995 to 1999. These changes probably contributed to the mild recession of 2001 that accompanied the crashing of the stock market bubble of the time. Securitization is not a bad idea by itself because it permits a better matching of investors and investment vehicles.
