{
  "title": "Cost-Benefit Analysis of Leaning Against the Wind: Are Costs Larger Also with Less Effective Macroprudential Policy?",
  "publication": "IMF Working Papers, January 11, 2016",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2016/12/31/cost-benefit-analysis-of-leaning-against-the-wind-are-costs-larger-also-with-less-effective-43610",
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  "summary": "“Leaning against the wind” (LAW) with a higher monetary policy interest rate may have benefits in terms of lower real debt growth and associated lower probability of a financial crisis but has costs in terms of higher unemployment and lower inflation, importantly including a higher cost of a crisis",
  "sections": [
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      "heading": "Summary findings",
      "content": "- “Leaning against the wind” (LAW) with a higher monetary policy interest rate may have benefits in terms of lower real debt growth and associated lower probability of a financial crisis.\n- LAW has costs in terms of higher unemployment and lower inflation, importantly including a higher cost of a crisis when the economy is weaker.\n- For existing empirical estimates, costs exceed benefits by a substantial margin, even if monetary policy is nonneutral and permanently affects real debt.\n- Less effective macroprudential policy and generally a credit boom, with resulting higher probability, severity, or duration of a crisis, increases costs of LAW more than benefits, further strengthening the strong case against LAW."
    },
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      "heading": "Subject focus and keywords",
      "content": "- Subject: Central bank policy rate, Financial crises, Macroprudential policy, Unemployment, Unemployment rate\n- Keywords: unemployment gap, WP"
    },
    {
      "heading": "Author and publication metadata",
      "content": "- By Lars E. O. Svensson\n- Publication date: January 11, 2016\n\nIMF Working Paper — Cost-Benefit Analysis of Leaning Against the Wind: Are Costs Larger Also with Less Effective Macroprudential Policy?\n\n---\n\n Content in this bundle\n\n- wp1603 — The effect of the policy rate on the expected non-crisis unemployment rate\n  - wp1603 — The effect of the policy rate on the expected non-crisis unemployment rate (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - wp1603 — The effect of the policy rate on the expected non-crisis unemployment rate (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2016/12/31/cost-benefit-analysis-of-leaning-against-the-wind-are-costs-larger-also-with-less-effective-43610"
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    "Authors: Lars E. O. Svensson",
    "Published: January 11, 2016",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781498314787.001",
    "“Leaning against the wind” (LAW) with a higher monetary policy interest rate may have benefits in terms of lower real debt growth and associated lower probability of a financial crisis.",
    "LAW has costs in terms of higher unemployment and lower inflation, importantly including a higher cost of a crisis when the economy is weaker.",
    "For existing empirical estimates, costs exceed benefits by a substantial margin, even if monetary policy is nonneutral and permanently affects real debt.",
    "Less effective macroprudential policy and generally a credit boom, with resulting higher probability, severity, or duration of a crisis, increases costs of LAW more than benefits, further strengthening the strong case against LAW.",
    "Subject: Central bank policy rate, Financial crises, Macroprudential policy, Unemployment, Unemployment rate",
    "Keywords: unemployment gap, WP",
    "By Lars E. O. Svensson",
    "Publication date: January 11, 2016",
    "**_wp1603 — The effect of the policy rate on the expected non-crisis unemployment rate**"
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