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The United Kingdom’s quantitative easing policy: design, operation and impact

In response to the intensification of the financial crisis in Autumn 2008, the Bank of England, in common with other central banks, loosened monetary policy using both conventional and unconventional policy measures. In the United Kingdom, the principal element of these unconventional measures was the policy of asset purchases financed by central bank money, so-called quantitative easing (QE). Over the period March 2009 to January 2010, £200 billion of assets were purchased, overwhelmingly made up of government securities, representing around 14% of annual GDP. This article reviews the motivation for these central bank asset purchases and describes how they were implemented. It goes on to review a range of evidence for the impact of the asset purchases made to date, both on financial markets and more widely on the economy. While there is considerable uncertainty about the magnitudes, the evidence suggests that QE asset purchases have had economically significant effects.

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Article provided by Bank of England in its journal Bank of England Quarterly Bulletin.

Volume (Year): 51 (2011)
Issue (Month): 3 ()
Pages: 200-212

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Handle: RePEc:boe:qbullt:0055
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  1. Claudio Borio & Piti Disyatat, 2010. "Unconventional Monetary Policies: An Appraisal," Manchester School, University of Manchester, vol. 78(s1), pages 53-89, 09.
  2. Michael A. S. Joyce & Ana Lasaosa & Ibrahim Stevens & Matthew Tong, 2011. "The Financial Market Impact of Quantitative Easing in the United Kingdom," International Journal of Central Banking, International Journal of Central Banking, vol. 7(3), pages 113-161, September.
  3. Joyce, Michael A.S. & Lildholdt, Peter & Sorensen, Steffen, 2010. "Extracting inflation expectations and inflation risk premia from the term structure: A joint model of the UK nominal and real yield curves," Journal of Banking & Finance, Elsevier, vol. 34(2), pages 281-294, February.
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  5. Gauti B. Eggertsson & Michael Woodford, 2003. "The Zero Bound on Interest Rates and Optimal Monetary Policy," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 34(1), pages 139-235.
  6. Michele Lenza & Huw Pill & Lucrezia Reichlin, 2010. "Monetary policy in exceptional times," Economic Policy, CEPR;CES;MSH, vol. 25, pages 295-339, 04.
  7. Joseph Gagnon & Matthew Raskin & Julie Remache & Brian Sack, 2010. "Large-scale asset purchases by the Federal Reserve: did they work?," Staff Reports 441, Federal Reserve Bank of New York.
  8. Bridges, Jonathan & Rossiter, Neil & Thomas, Ryland, 2011. "Understanding the recent weakness in broad money growth," Bank of England Quarterly Bulletin, Bank of England, vol. 51(1), pages 22-35.
  9. Harrison, Richard, 2012. "Asset purchase policy at the effective lower bound for interest rates," Bank of England working papers 444, Bank of England.
  10. Hess Chung & Jean-Philippe Laforte & David Reifschneider & John C. Williams, 2011. "Have we underestimated the likelihood and severity of zero lower bound events?," Working Paper Series 2011-01, Federal Reserve Bank of San Francisco.
  11. Kapetanios, George & Mumtaz, Haroon & Stevens, Ibrahim & Theodoridis, Konstantinos, 2012. "Assessing the economy-wide effects of quantitative easing," Bank of England working papers 443, Bank of England.
  12. Ben S. Bernanke & Vincent R. Reinhart, 2004. "Conducting Monetary Policy at Very Low Short-Term Interest Rates," American Economic Review, American Economic Association, vol. 94(2), pages 85-90, May.
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