As I tried to argue, the interpretation of the link between the reduction in macroeconomic uncertainty – the Great Moderation – and the pricing of that uncertainty in the markets poses many unresolved issues.
But very few observers and scholars would object that central banks’ commitment to keeping inflation low and stable, their improved communication about their price stability objectives and their acting on those objectives by the force of deeds, has importantly contributed to the reduction in macroeconomic risk that we find in the data.