IMF working paper examines monetary policy ‘leaning against the wind'

A new working paper, published today by the International Monetary Fund, analyses how monetary policy should best be conducted if it is aiming for financial stability as well as to stimulate the economy – finding that interest rate cuts should be deep but brief, returning to their equilibrium quicker than if there was no financial stability target.

The paper – 'Leaning Against the Wind' and the Timing of Monetary Policy, by Itai Agur and Maria Demertzis – develops a model that shows a monetary

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