Investors and policymakers are now focused on when the Federal Reserve will raise interest rates.

But, "there is a more fundamental question that needs to be answered," Stanford University economist John Taylor writes in The Wall Street Journal. "Will the central bank continue its highly interventionist and discretionary monetary policies, or will it move to a more rules-based approach?"

The Fed has boosted its balance sheet to $4.3 trillion with its quantitative easing during the past six years.

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Taylor cites a study from University of Houston economist David Papell as to what happens when the central bank utilizes rules-based policies.

"The periods when it did — such as in much of the 1980s and '90s — coincided with good economic performance: price stability, steady employment and output growth," notes Taylor, Treasury undersecretary for international affairs during the George W. Bush administration.

"From 2003 to 2005, however, the Fed kept interest rates lower than such a rules-based approach would imply. This contributed mightily to the housing bubble and the risk-taking search for yield," he adds.

"The big swings between discretion and rules that have characterized Fed history — and the damage this has led to — leads me to favor legislation requiring the Fed to adopt rules for setting policy on the interest rate or the money supply," Taylor suggests.

"The Fed, not Congress, would choose the rule. But the rule would be public. If the Fed deviated from it, the Fed chair would be obligated to explain why, in writing and congressional testimony."

Meanwhile, Stephen Roach, a lecturer at Yale University and former chairman of Morgan Stanley Asia, says the Fed's massive easing program might spark another global financial crisis.

"Monetary accommodation, to the point of ignoring the stresses and strains of financial stability and what they mean for asset markets and credit markets, is something that needs to be seriously rethought," he tells CNBC.

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Related Stories:

• Morici: Five Things to Know About the Fed's Obsession With Inflation
• Robert Rubin: Fed's QE3 and the Unwinding of it Carry Great Risk