Leaning against the Wind and Crisis Risk

Can central banks defuse rising stability risks in financial booms by leaning against the wind with higher interest rates? This paper studies state-dependent effects of monetary policy on crisis risk. Based near-universe advanced economy cycles since nineteenth century, we show that discretionary policies during credit and asset price are more likely to trigger crises than prevent them. (JEL E43, E44, E52, E58, F33)