Leaning against the Wind and Crisis Risk

Moritz Schularick, Lucas ter Steege and Felix Ward

No 8484, CESifo Working Paper Series from CESifo

Abstract: 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.

Keywords: financial crises; instrumental variable; open economy trilemma; local projections (search for similar items in EconPapers)
JEL-codes: E44 E50 G01 G15 N10 (search for similar items in EconPapers)
Date: 2020
New Economics Papers: this item is included in nep-cba, nep-his, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Leaning against the Wind and Crisis Risk (2021)
Working Paper: Leaning against the Wind and Crisis Risk (2021)
Working Paper: Leaning against the Wind and Crisis Risk (2021)
Working Paper: Leaning against the wind and crisis risk (2020)
Working Paper: Leaning against the wind and crisis risk (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_8484

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