## Cost-Benefit Analysis of Leaning Against the Wind: Are Costs Larger Also with Less Effective Macroprudential Policy?

_IMF Working Papers, January 11, 2016_

## Source details

**Canonical URL:** [Cost-Benefit Analysis of Leaning Against the Wind: Are Costs Larger Also with Less Effective Macroprudential Policy?](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)

## Other formats

- [Markdown version](/en/publications/wp/issues/2016/12/31/cost-benefit-analysis-of-leaning-against-the-wind-are-costs-larger-also-with-less-effective-43610/index.md)
- [Structured JSON version](/en/publications/wp/issues/2016/12/31/cost-benefit-analysis-of-leaning-against-the-wind-are-costs-larger-also-with-less-effective-43610/index.json)
- [Bundle manifest](/en/publications/wp/issues/2016/12/31/cost-benefit-analysis-of-leaning-against-the-wind-are-costs-larger-also-with-less-effective-43610/bundle-manifest.json)

## Bibliographic details
- Authors: Lars E. O. Svensson
- Published: January 11, 2016
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781498314787.001

---

### Summary findings
- “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 focus and keywords
- Subject: Central bank policy rate, Financial crises, Macroprudential policy, Unemployment, Unemployment rate
- Keywords: unemployment gap, WP

### Author and publication metadata
- By Lars E. O. Svensson
- Publication date: January 11, 2016

*IMF Working Paper — Cost-Benefit Analysis of Leaning Against the Wind: Are Costs Larger Also with Less Effective Macroprudential Policy?*

---

## Content in this bundle

- **_wp1603 — The effect of the policy rate on the expected non-crisis unemployment rate**
  - [_wp1603 — The effect of the policy rate on the expected non-crisis unemployment rate (Markdown version)](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2016/_wp1603.pdf.md){rel="alternate" type="text/markdown"}
  - [_wp1603 — The effect of the policy rate on the expected non-crisis unemployment rate (PDF)](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2016/_wp1603.pdf){rel="external" type="application/pdf"}

---

_Source: 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_