• Corpus ID: 222132375

Should Monetary Policy Lean Against the Wind? Quasi-experimental Evidence from Federal Reserve Policies in 1920-21

  title={Should Monetary Policy Lean Against the Wind? Quasi-experimental Evidence from Federal Reserve Policies in 1920-21},
  author={Kilian Rieder},
Are credit booms and high leverage in the financial sector better addressed by conventional monetary policy “leaning against the wind” (LAW) or by macroprudential policy? I exploit a natural experiment to answer this question. In 1920, when U.S. monetary policy was still decentralized, four Federal Reserve Banks implemented a conventional rate hike to address financial stability concerns. Another four Reserve Banks resorted to macroprudential policy. Due to regional financial segmentation and… 
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