Journal Article

Quantitative easing is not as unconventional as it seems

Peter Sinclair and Colin Ellis

in Oxford Review of Economic Policy

Published on behalf of The Oxford Review of Economic Policy Ltd

Volume 28, issue 4, pages 837-854
Published in print January 2012 | ISSN: 0266-903X
Published online December 2012 | e-ISSN: 1460-2121 | DOI: http://dx.doi.org/10.1093/oxrep/grs031
Quantitative easing is not as unconventional as it seems

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  • Monetary Policy, Central Banking, and the Supply of Money and Credit
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Policy interest rates do not have to be short. The means by which monetary authorities influence prices and quantities can differ, but the obstacles to altering one rather than the other are not insuperable. Inflation is sluggish, and expectations of future interest rates—long and short, nominal and real—are diverse and uncertain. These factors determine the limited power that monetary authorities enjoy when they conduct quantitative easing. But this policy is not as unconventional as some have claimed, and indeed can be viewed as broadly similar to conventional monetary measures. The impact of quantitative easing, however, could be very different depending on the underlying structure of the economy and the fiscal authorities’ responses. Finally, we note some important caveats that must be borne in mind when trying to evaluate the impact of quantitative easing, particularly given the fact that the world’s main financial markets are closely linked.

Keywords: quantitative easing; monetary policy; E40; E58

Journal Article.  8214 words.  Illustrated.

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

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