IDEAS home Printed from https://ideas.repec.org/a/oup/oxford/v28y2012i4p640-670.html
   My bibliography  Save this article

QE: a successful start may be running into diminishing returns

Author

Listed:
  • Charles A. E. Goodhart
  • Jonathan P. Ashworth

Abstract

Existing studies may have underestimated the impact of QE1 on UK GDP because they did not take full account of the beneficial effect on credit risk spreads and on the exchange rate. However, all such effects were also influenced by the roughly simultaneous introduction of similar easing in the USA, which complicates the analysis. Another area where QE has been positive is in reducing public-sector borrowing costs. Where QE1 (and subsequent rounds) have disappointed is in their inability to stimulate a recovery in credit and monetary growth, amid an increased desire among banks to hold far more of their reserves at the central bank. Moreover, there is growing evidence of significant diminishing returns in QE2 as gilt rates have already fallen to historically low levels and the risk is that, if policy-makers fail to resuscitate the bank lending channel, further rounds of QE could potentially have negative returns Copyright 2012, Oxford University Press.

Suggested Citation

  • Charles A. E. Goodhart & Jonathan P. Ashworth, 2012. "QE: a successful start may be running into diminishing returns," Oxford Review of Economic Policy, Oxford University Press, vol. 28(4), pages 640-670, WINTER.
  • Handle: RePEc:oup:oxford:v:28:y:2012:i:4:p:640-670
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1093/oxrep/grs034
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Green, Christopher & Bai, Ye & Murinde, Victor & Ngoka, Kethi & Maana, Isaya & Tiriongo, Samuel, 2016. "Overnight interbank markets and the determination of the interbank rate: A selective survey," International Review of Financial Analysis, Elsevier, vol. 44(C), pages 149-161.
    2. Victor Echevarria Icaza & Simón Sosvilla-Rivero, 2017. "Yields on sovereign debt, fragmentation and monetary policy transmission in the euro area: A GVAR approach," Working Papers 17-01, Asociación Española de Economía y Finanzas Internacionales.
    3. Haldane, Andrew & Roberts-Sklar, Matt & Wieladek, Tomasz & Young, Chris, 2016. "QE: the story so far," CEPR Discussion Papers 11691, C.E.P.R. Discussion Papers.
    4. Hashem Pesaran, M. & Smith, Ron P., 2016. "Counterfactual analysis in macroeconometrics: An empirical investigation into the effects of quantitative easing," Research in Economics, Elsevier, vol. 70(2), pages 262-280.
    5. Alan Blinder & Michael Ehrmann & Jakob de Haan & David-Jan Jansen, 2017. "Necessity as the mother of invention: monetary policy after the crisis," Economic Policy, CEPR;CES;MSH, vol. 32(92), pages 707-755.
    6. Churm, Rohan & Joyce, Mike & Kapetanios, George & Theodoridis, Konstantinos, 2015. "Unconventional monetary policies and the macroeconomy: the impact of the United Kingdom's QE2 and Funding for Lending Scheme," Bank of England working papers 542, Bank of England.
    7. repec:kap:iecepo:v:15:y:2018:i:2:d:10.1007_s10368-017-0401-7 is not listed on IDEAS
    8. Hartmann, Philipp & Smets, Frank, 2018. "The first twenty years of the European Central Bank: monetary policy," Working Paper Series 2219, European Central Bank.
    9. Matthieu Darracq Paries & Niki Papadopoulou, 2019. "On the Credit and Exchange Rate Channels of Central Bank Asset Purchases in a Monetary Union," Working Papers 2019-2, Central Bank of Cyprus.
    10. Joyce, Michael & Liu, Zhuoshi & Tonks, Ian, 2014. "Institutional investor portfolio allocation, quantitative easing and the global financial crisis," Bank of England working papers 510, Bank of England.
    11. Christopher Bowdler & Amar Radia, 2012. "Unconventional monetary policy: the assessment," Oxford Review of Economic Policy, Oxford University Press, vol. 28(4), pages 603-621, WINTER.
    12. Jörg Bibow, 2018. "Unconventional monetary policies and central bank profits," IMK Studies 62-2018, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    13. Matthias Neuenkirch, 2016. "An Unconventional Approach to Evaluate the Bank of England's Asset Purchase Program," Research Papers in Economics 2016-11, University of Trier, Department of Economics.
    14. Josh Ryan-Collins & Frank van Lerven, 2018. "Bringing the helicopter to ground: a historical review of fiscal-monetary coordination to support economic growth in the 20th century," Working Papers PKWP1810, Post Keynesian Economics Society (PKES).
    15. Jorg Bibow, 2015. "The Euro's Savior? Assessing the ECB's Crisis Management Performance and Potential for Crisis Resolution," Economics Working Paper Archive wp_845, Levy Economics Institute.
    16. repec:nse:ecosta:ecostat_2017_494-495-496_6 is not listed on IDEAS
    17. Joerg Bibow, 2018. "Unconventional Monetary Policies and Central Bank Profits: Seigniorage as Fiscal Revenue in the Aftermath of the Global Financial Crisis," Economics Working Paper Archive wp_916, Levy Economics Institute.
    18. repec:eee:finana:v:52:y:2017:i:c:p:281-291 is not listed on IDEAS
    19. Kok, Christoffer & Darracq Pariès, Matthieu & Hałaj, Grzegorz, 2016. "Bank capital structure and the credit channel of central bank asset purchases," Working Paper Series 1916, European Central Bank.
    20. Ryan-Collins, Josh & Werner, Richard A. & Castle, Jennifer, 2016. "A half-century diversion of monetary policy? An empirical horse-race to identify the UK variable most likely to deliver the desired nominal GDP growth rate," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 43(C), pages 158-176.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:oup:oxford:v:28:y:2012:i:4:p:640-670. 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: (Oxford University Press) or (Christopher F. Baum). General contact details of provider: https://academic.oup.com/oxrep .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.