The credit crisis of 2007-2008 could lead central banks to be charged with the task of ensuring financial-market or financial-institution stability, and it is a role that central bankers seem reluctant to take.
Last night in Hong Kong, a discussion led by Charles Evans, president and CEO of the Federal Reserve Bank of Chicago, brought out the tension between a perceived need for central banks to preempt the next financial crisis by identifying and addressing asset bubbles, and a reluctance to attempt this. The dinner was organised by the Institute of Regulation Risk.
Evans makes the point that, even with hindsight, it requires a huge amount of data and analysis to determine when...
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