Essential concepts necessary to consider when evaluating the efficacy of quantitative easing
The economic impact from quantitative easing (QE) may be much less than assumed by the Federal Reserve. One focus is on the effectiveness of QE to stabilize a failing banking system, and the judgment here is largely positive. A second focus, especially in the US, is on evaluating subsequent rounds of QE that were implemented after the economy had resumed growth and after the banking sector had recapitalized and returned to profitability. For these subsequent rounds of QE, the reviews are decidedly mixed and heavily dependent on the assumptions embedded in the economic models used by the researchers. Researchers willing to assume that the US is a closed domestic economy tend to find a large impact on long-term interest rates from QE. If the US is part of a highly integrated global economy, a smaller effect is presumed. Then there is the more important and controversial evaluation of whether there is any impact on real GDP growth and job creation from QE once the economy is growing again, even if unemployment rates remain historically elevated. What one chooses to ignore or assume does not exist can be more important to the conclusions of QE evaluations than may meet the eye. Inappropriate assumptions can lead to poor decisions.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Bernanke, Ben S., 2012. "Monetary Policy since the Onset of the Crisis : a speech at the Federal Reserve Bank of Kansas City Economic Symposium, Jackson Hole, Wyoming, August 31, 2012," Speech 645, Board of Governors of the Federal Reserve System (U.S.).
- Michael T. Kiley, 2012.
"The aggregate demand effects of short- and long-term interest rates,"
Finance and Economics Discussion Series
2012-54, Board of Governors of the Federal Reserve System (U.S.).
- Michael T. Kiley, 2014. "The Aggregate Demand Effects of Short- and Long-Term Interest Rates," International Journal of Central Banking, International Journal of Central Banking, vol. 10(4), pages 69-104, December.
- Carmen M. Reinhart & Kenneth S. Rogoff, 2009.
"This Time Is Different: Eight Centuries of Financial Folly,"
Princeton University Press,
edition 1, number 8973.
- Putnam, Bluford H. & Azzarello, Samantha, 2012. "A Bayesian interpretation of the Federal Reserve's dual mandate and the Taylor Rule," Review of Financial Economics, Elsevier, vol. 21(3), pages 111-119.
- Jens H. E. Christensen & Glenn D. Rudebusch, 2012.
"The response of interest rates to U.S. and U.K. quantitative easing,"
Working Paper Series
2012-06, Federal Reserve Bank of San Francisco.
- Jens H. E. Christensen & Glenn D. Rudebusch, 2012. "The Response of Interest Rates to US and UK Quantitative Easing," Economic Journal, Royal Economic Society, vol. 122(564), pages 385-414, November.
- Reinhart, Karmen & Rogoff, Kenneth, 2009. ""This time is different": panorama of eight centuries of financial crises," Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 1, pages 77-114, March.
- Canlin Li & Min Wei, 2012. "Term structure modelling with supply factors and the Federal Reserve's Large Scale Asset Purchase programs," Finance and Economics Discussion Series 2012-37, Board of Governors of the Federal Reserve System (U.S.).
- William R. White, 2012. "Ultra easy monetary policy and the law of unintended consequences," Globalization and Monetary Policy Institute Working Paper 126, Federal Reserve Bank of Dallas.
When requesting a correction, please mention this item's handle: RePEc:eee:revfin:v:22:y:2013:i:1:p:1-7. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu)
If references are entirely missing, you can add them using this form.