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Quantitative easing: a sceptical survey

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  • Christopher Martin
  • Costas Milas

Abstract

Evaluation of quantitative easing (QE) is difficult as it is only used in response to severe and unusual economic difficulties. Despite this, we argue that two main conclusions can be drawn from a sceptical reading of the evidence. First, large-scale asset purchases reduce government bond rates, especially at the longer end of the yield curve. However, this effect may be temporary and is small if bond rates are already low, while initial waves of QE are more effective than subsequent programmes. Second, QE appears to have been effective in late 2008 and 2009, preventing even larger declines in output and inflation than were experienced. We argue that the literature is limited, relying on similar methodologies and largely originating in central banks. Exploration of alternative approaches to QE would be useful in widening an evidence base that is currently too narrow. Copyright 2012, Oxford University Press.

Suggested Citation

  • Christopher Martin & Costas Milas, 2012. "Quantitative easing: a sceptical survey," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 28(4), pages 750-764, WINTER.
    • Handle: RePEc:oup:oxford:v:28:y:2012:i:4:p:750-764
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    File URL: http://hdl.handle.net/10.1093/oxrep/grs029
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    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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