Vox column: Re-evaluating the result that the costs of ‘leaning against the wind’ exceed the benefits

Vox column: Re-evaluating the result that the costs of “leaning against the wind” exceed the benefits, January 24, 2017.

The IMF and the Federal Open Market Committee have both suggested that the costs of ‘leaning against the wind’ exceed the benefits. This Vox column responds to claims that the results of my research backing up this conclusion could be overturned. It argues that the alternative assumptions necessary to overturn the result are unrealistic, and that the finding that the costs of the policy exceed the benefits therefore seems to be robust.

The column summarizes “How Robust Is the Result That the Cost of “Leaning Against the Wind” Exceeds the Benefit? Response to Adrian and Liang.”

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Commentary on Monetary Policy and Financial Stability

“Commentary on Monetary Policy and Financial Stability” (slides), presented at “Challenges to Financial Stability in a Low Interest Rate World,” Annual International Journal of Central Banking Research Conference, Federal Reserve Bank of San Francisco, November 21-22, 2016.

Published as “Leaning Against the Wind: Costs and Benefits, Effects on Debt, Leaning in DSGE Models, and a Framework for Comparison of Results,” International Journal of Central Banking 13 (September 2017) 385-408.

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FOMC minutes: Costs of leaning against the wind typically outweigh benefits

FOMC April 26-27 minutes on the relationship between monetary policy and financial stability (pp. 2-3):

Most participants judged that the benefits of using monetary policy to address threats to financial stability would typically be outweighed by the costs associated with deviations from the Committee’s employment and price-stability objectives induced by such actions; some also noted that the benefits are highly uncertain.

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