Cost-benefit analysis of leaning against the wind

An obvious cost of “leaning against the wind” is a weaker economy if no (financial) crisis occurs. Possible benefits are lower probabilities and smaller magnitudes of crises. A second cost-less obvious, previously overlooked, but higher-is a weaker economy if a crisis occurs. For representative estimates, costs exceed benefits by substantial margins. Overturning the result requires policy-rate effects on the probability and magnitude of crises more than 5-40 standard errors larger than representative estimates. Higher probabilities, larger magnitudes, or longer durations of crises-typical consequences of ineffective macroprudential policy-increase the margin of costs over benefits