Journal Article

Quantitative easing: a sceptical survey

Christopher Martin and Costas Milas

in Oxford Review of Economic Policy

Published on behalf of The Oxford Review of Economic Policy Ltd

Volume 28, issue 4, pages 750-764
Published in print January 2012 | ISSN: 0266-903X
Published online December 2012 | e-ISSN: 1460-2121 | DOI: https://dx.doi.org/10.1093/oxrep/grs029
Quantitative easing: a sceptical survey

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  • Monetary Policy, Central Banking, and the Supply of Money and Credit
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Evaluation of quantitative easing (QE) is difficult as it is only used in response to severe and unusual economic difficulties. Despite this, we argue that two main conclusions can be drawn from a sceptical reading of the evidence. First, large-scale asset purchases reduce government bond rates, especially at the longer end of the yield curve. However, this effect may be temporary and is small if bond rates are already low, while initial waves of QE are more effective than subsequent programmes. Second, QE appears to have been effective in late 2008 and 2009, preventing even larger declines in output and inflation than were experienced. We argue that the literature is limited, relying on similar methodologies and largely originating in central banks. Exploration of alternative approaches to QE would be useful in widening an evidence base that is currently too narrow.

Keywords: quantitative easing (QE); financial crisis; E43; E58

Journal Article.  7732 words.  Illustrated.

Subjects: Monetary Policy, Central Banking, and the Supply of Money and Credit ; Money and Interest Rates

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