• Economics
  • Published 2016

A quantitative case for leaning against the wind

@inproceedings{Filardo2016AQC,
  title={A quantitative case for leaning against the wind},
  author={Andrew Filardo and Phurichai Rungcharoenkitkul},
  year={2016}
}
Should a monetary authority lean against the build-up of financial imbalances? We study this policy question in an environment in which there are recurring cycles of financial imbalances that develop over time and eventually collapse in a costly manner. The optimal policy reflects the trade-off between the short-run macroeconomic costs of leaning against the wind and the longer-run benefits of stabilising the financial cycle. We model the financial cycle as a nonlinear Markov regime-switching… CONTINUE READING

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