Alan Greenspan's legacy on monetary policy

WASHINGTON, Jan. 31 (UPI) -- The departure Tuesday of the long-serving Federal Reserve Chairman Alan Greenspan leaves a distinct legacy on money supply, economists say.

In his 18 years at the helm of the world's most important central bank, Greenspan continued the work of his predecessor Paul Volker to solidify a consensus on the role that central banks can play by supplying more or less money to the economy, the Christian Science Monitor said.

For example, the Volker-Greenspan stewardship of the Fed has shown that monetary policy can defeat inflation, the newspaper said. It also has demonstrated that popular confidence, or its lack, profoundly affects inflation.

In addition, Volker and Greenspan have ensured that price stability is the Fed's priority.

"The way to get higher growth is to have lower inflation," says Allan Meltzer, an economist and a historian of the Fed at Carnegie Mellon University in Pittsburgh. "The success of the Fed and the Bank of England has done much to convince people that that's the way to go."

What is less certain is whether the public consensus on the Volker-Greenspan legacy can be transferred to the Fed itself or must be re-earned by each successive Fed chairman.