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Leaning Against the Wind: Costs and Benefits, Effects on Debt, Leaning in DSGE Models, and a Framework for Comparison of Result

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  • Svensson, Lars E.O.

Abstract

The simple and transparent framework for cost-benefit analysis of leaning against the wind (LAW) in Svensson (2017a) and its main result are summarized. The analysis of the policy-rate effects on debt in Bauer and Granziera (2017) does not seem to contradict that the effects may be small and of either sign. The analysis of LAW in DSGE models is complicated and the results of Gerdrup et al. (2017) may not be robust. The Svensson (2017a) framework may allow comparison and evaluation of old and new approaches and their results. As an example, it is shown that these three papers result in very different marginal costs of LAW and that a realistic policy-rate effect on unemployment is crucial.

Suggested Citation

  • Svensson, Lars E.O., 2017. "Leaning Against the Wind: Costs and Benefits, Effects on Debt, Leaning in DSGE Models, and a Framework for Comparison of Result," CEPR Discussion Papers 12226, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:12226
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    References listed on IDEAS

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    Cited by:

    1. Stijn Claessens & M Ayhan Kose, 2018. "Frontiers of macrofinancial linkages," BIS Papers, Bank for International Settlements, number 95.
    2. Lars E. O. Svensson, 2018. "Monetary policy and macroprudential policy: Different and separate?," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 51(3), pages 802-827, August.
    3. Emanuele Franceschi, 2021. "Taylor Rules and Liquidity in Financial Markets," Revue économique, Presses de Sciences-Po, vol. 72(1), pages 103-134.
    4. Agur, Itai, 2019. "Monetary and macroprudential policy coordination among multiple equilibria," Journal of International Money and Finance, Elsevier, vol. 96(C), pages 192-209.
    5. Saskia Ter Ellen & Vegard H. Larsen & Leif Anders Thorsrud, 2022. "Narrative Monetary Policy Surprises and the Media," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 54(5), pages 1525-1549, August.
    6. Uwe Vollmer, 2022. "Monetary policy or macroprudential policies: What can tame the cycles?," Journal of Economic Surveys, Wiley Blackwell, vol. 36(5), pages 1510-1538, December.
    7. Ben-Haim, Yakov & Demertzis, Maria & Van den End, Jan Willem, 2018. "Evaluating monetary policy rules under fundamental uncertainty: An info-gap approach," Economic Modelling, Elsevier, vol. 73(C), pages 55-70.

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    More about this item

    Keywords

    Monetary policy; Financial stability; Macroprudential policy; Financial crises;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G01 - Financial Economics - - General - - - Financial Crises

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