There are those who believe that Mr Greenspan's tenure as chairman of the US Federal Reserve Board was epochal. His 18 years at the helm set benchmarks for his successors as well as central bankers across the globe, for dealing with both the new opportunities emerging in an increasingly globalised economy and the risks that come with it.

From dealing with shocks to the financial system to accommodating the robust expansion of the US economy during the decade of the 1990s to the quick and effective response to the recession in the early months of this decade -- all these reflected both deft touch and timing and an appreciation of the evolving structure of the global macroeconomy.

But, there are also those who believe that, not only did he get undeserved credit for macroeconomic management, he also leaves behind a legacy that threatens to implode sooner or later. His interest rate announcements were usually anticipated by futures markets and were, therefore, not as proactive as they appeared to be.

The expansion of the 1990s was in danger of overheating around 1997, which would have most likely elicited a contractionary response by the Fed. However, the East Asian crisis took the pressure of global commodity prices and eased inflationary pressures, allowing the pro-growth stance to continue and keep the expansion going.

Most importantly, the Fed's bias towards liquidity and soft interest rates, through much of his term, translated into continuously rising asset prices, both financial and real estate. The combination of high asset prices and low interest rates, in turn, resulted in a borrowing-fuelled consumption boom. This is the house of cards that Mr Greenspan leaves behind.

Any sharp increase in interest rates or collapse in asset prices will inevitably have a chain reaction, resulting in consumer distress. Even though he often advocated caution to the financial markets, introducing two enduring phrases into the economic vocabulary -- irrational exuberance and speculative excess -- his critics argue that he did nothing concrete to curb their expansionary tendencies.

So, where does that leave us? I think the Greenspan era of monetary management is most appropriately seen in the broader context of the very fundamental changes that have taken place in the global economy over the last two decades and the impact that these have had on the macroeconomic scenarios in most countries.

To put it in a nutshell, from the US perspective, the period has seen a dramatic change in the relationship between growth and inflation, which is pivotal to the conduct of monetary policy. The economy is able to sustain any given rate of growth with an appreciably lower rate of inflation than before.

Two factors have been responsible for this.

One is domestic productivity increases, which have been discussed extensively, with particular reference to the role that IT has played in them. The second is the relentless search for lower-cost production locations for both goods and services, in which China and India play such an important part. The flip side of the latter is, of course, the huge current account deficit that the US currently runs with the rest of the world, particularly China, but that is another story.

The significance of these developments for monetary management lies in their endurance. Has their combined impact permanently improved the growth-inflation trade-off, or will it eventually return to historically more consistent levels?

Mr Greenspan's actions suggest that he believed that it was the former. The logical policy position, then, was to allow interest rates to find a lower equilibrium, consistent with the new growth-inflation relationship.

However, this relationship was and, perhaps, remains in a dynamic situation. All opportunities to increase productivity and lower costs through global re-location have not been fully exploited. As this process continues, the equilibrium rate of inflation in goods and services declines.

We are used to thinking of a correspondence between liquidity and goods and services inflation, a la the quantity theory of money. What recent experience has demonstrated, certainly in the US but also in other economies going through a similar macroeconomic transition, is that asset prices need to be factored into the equation as well.

Liquidity will cause prices to rise across the board. As the potential impact on the prices of goods and services is neutralised by the factors referred to above, the relative weight of adjustment inevitably falls on asset prices. In short, higher asset prices are an inevitable component of the new macroeconomic equilibrium.

Should the central bank fight asset price inflation? Mr Greenspan's answer was apparently "no". Mr Bernanke seems to share this view. I do not see an unambiguous theoretical perspective on this issue, certainly nowhere near the clarity with which a central bank's actions against goods and services inflation can be justified.

Concerns about the risks and consequences of sudden and sharp deflations are legitimate, but they mostly stem from perceptions about bubbles, in which asset prices are far removed from their fundamental values.

The macroeconomic scenario being laid out here suggests that today's asset prices are the logical outcome of changed fundamentals and not primarily the result of either irrational exuberance or speculative excess. If that is indeed the case, the probability of a sharp deflation is far more closely linked to the precipitation of a tangible shock to the global economy than to changes in subjective perceptions of investors around the globe.

Of course, this does not absolve central banks of their responsibility for macroeconomic stability. It does, however, require them to shift their focus and attention towards the drivers of asset prices and the risks inherent in them. It puts greater emphasis on the ability of banking systems across the world to weather the shock of a potential deflation.

Prudential regulation and monetary management are no longer distinct and separate functions of the central bank; they are increasingly being tied together through the common factor of asset prices.

In sum, with reference to this broader macroeconomic context, I would describe Mr Greenspan's legacy in two parts.

One, his approach to monetary policy recognised and accommodated the impact and potential benefits of globalisation. Two, in doing so, it laid the foundations for a more integrated approach to central banking, challenging a widespread trend towards separation and specialisation.

The debate around these issues will shape the structure and functions of central banks around the world in the years to come.

The author is chief economist, Crisil. The views here are personal.