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 crisis risk. 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.
American Economic Review: Insights
Erasmus School of Economics

Schularick, M., ter Steege, L., & Ward, F. (2021). Leaning against the Wind and Crisis Risk. American Economic Review: Insights, 3(2). Retrieved from