During this period, economists found considerable evidence that central banks that are afforded policy independence in the pursuit of their mandated objectives deliver better economic outcomes.37 One cannot look back at the Great Moderation today without asking whether the sustained economic stability of the period somehow promoted the excessive risk-taking that followed.
The idea that this long period of calm lulled investors, financial firms, and financial regulators into paying insufficient attention to building risks must have some truth in it. I don’t think we should conclude, though, that we therefore should not strive to achieve economic stability.