As another example of being proactive, I would suggest that the efforts to increase the transparency of central bank actions that I discussed at the beginning of my talk have, in some part, been motivated by a desire to enhance financial stability. 3 One lesson that stands out from our experience gained during the past decade is that only looking backward is not useful.
Prudent central bankers must be forward-looking, searching for developments that might become significant problems under some circumstances. What would be useful from a riskmanagement perspective is more information along the lines of what we have for inflation--market instruments that allow us to measure, to some extent, market participants' expectations.