Identifying bubbles in a timely manner As for the first of the three conditions, events of the past few years, coupled with advances in our understanding of how bubbles form and persist, have made me a little less dubious that policymakers can reliably identify a serious bubble before it bursts.
However, I am still skeptical about our ability to detect bubbles early enough to make a general policy of leaning against them successful on average. The identification of bubbles in real time is tricky because not all the fundamental factors driving asset prices are directly observable; thus, any judgment by a central bank that an asset is overpriced is by nature uncertain.