Leaning against the Wind and Crisis Risk

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.

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Year of publication:	2020
Authors:	Schularick, Moritz ; ter Steege, Lucas ; Ward, Felix
Publisher:	Munich : Center for Economic Studies and Ifo Institute (CESifo)
Subject:	financial crises \| instrumental variable \| open economy trilemma \| local projections

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Series:	CESifo Working Paper ; 8484
Type of publication:	Book / Working Paper
Type of publication (narrower categories):	Working Paper
Language:	English
Other identifiers:	1727343018 [GVK] hdl:10419/223556 [Handle] RePec:ces:ceswps:_8484 [RePEc]
Classification:	E44 - Financial Markets and the Macroeconomy ; E50 - Monetary Policy, Central Banking and the Supply of Money and Credit. General ; G01 - Financial Crises ; G15 - International Financial Markets ; N10 - Macroeconomics and Monetary Economics; Growth and Fluctuations. General, International, or Comparative
Source:	EconStor

Persistent link: https://www.econbiz.de/10012269554