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Unconventional Monetary Policy in the UK: A Modern Money Critique

  • Timothy Sharpe
  • Martin Watts
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    The ongoing Global Financial Crisis (GFC) has posed a growing challenge to the implementation of monetary stimulus measures in both sovereign (e.g. US, UK, Japan) and non-sovereign (eurozone) economies. With the policy rate close to the zero nominal bound, the UK has relied on quantitative easing, ostensibly to improve market liquidity and/or stimulate economic activity, despite being freed from the policy constraints of a non-sovereign economy. The evidence regarding the macroeconomic effects of quantitative easing is, however, largely inconclusive. Meanwhile, UK growth forecasts have been revised downwards but, at the time of writing, the government remains committed to its fiscal austerity programme. In this paper we explore the origins of quantitative easing, its underlying objectives, the theoretical arguments for its use and the empirical evidence concerning its impact. Our analysis focuses on the policies of the Bank of England since the advent of the GFC, and is informed by the principles of Modern Monetary Theory.

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    Article provided by Economic Issues in its journal Economic Issues.

    Volume (Year): 18 (2013)
    Issue (Month): 2 (September)
    Pages: 41-64

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    Handle: RePEc:eis:articl:213sharpe
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    9. Stephanie Kelton, 2011. "Limitations of the Government Budget Constraint: Users vs. Issuers of the Currency," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 58(1), pages 57-66, March.
    10. Ben S. Bernanke & Vincent R. Reinhart & Brian P. Sack, 2004. "Monetary policy alternatives at the zero bound: an empirical assessment," Finance and Economics Discussion Series 2004-48, Board of Governors of the Federal Reserve System (U.S.).
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