Leaning against the Wind and Crisis Risk

Arbeitspapier

Can central banks defuse rising stability risks in financial booms by leaning against the wind with higher interest rates? This paper studies the state-dependent effects of monetary policy on financial stability. Based on the near-universe of advanced economy financial cycles since the 19th century, we show that discretionary leaning against the wind policies during credit and asset price booms are more likely to trigger crises than prevent them.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 8484

Classification and Topics

• Classification: Wirtschaft ; Financial Markets and the Macroeconomy ; Monetary Policy, Central Banking, and the Supply of Money and Credit: General ; Financial Crises ; International Financial Markets ; Economic History: Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations: General, International, or Comparative
• Subject: financial crises ; instrumental variable ; open economy trilemma ; local projections

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Schularick, Moritz ; ter Steege, Lucas ; Ward, Felix
• Event: Veröffentlichung
• (who): Center for Economic Studies and Ifo Institute (CESifo)
• (where): Munich
• (when): 2020

Further information

• Handle: http://hdl.handle.net/10419/223556
• Last update: 10.03.2025, 11:44 AM CET