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Too Loose for Comfort


  • John C. Michaelson
  • Sébastien E.J. Walker


This paper argues that the benefits of the current US and UK monetary policy are limited and outweighed by significant costs. The policy of low or negative real interest rates, combined with quantitative easing, may be helpful to large companies and large banks. However, due in part to changes in the financial system over the past 30 years, the policy has not resulted in sufficiently lower borrowing costs or increased access to credit, especially by job-producing SMEs, to compensate for the adverse impact on savers, endowments, pension funds, insurance companies and others. We conclude that the policy is probably retarding rather than assisting economic recovery and that funds used for quantitative easing could be more usefully put towards a form of ‘credit easing’.

Suggested Citation

  • John C. Michaelson & Sébastien E.J. Walker, 2012. "Too Loose for Comfort," World Economics, World Economics, 1 Ivory Square, Plantation Wharf, London, United Kingdom, SW11 3UE, vol. 13(3), pages 69-78, July.
  • Handle: RePEc:wej:wldecn:527

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    References listed on IDEAS

    1. El-Gamal,Mahmoud A., 2009. "Islamic Finance," Cambridge Books, Cambridge University Press, number 9780521741262, March.
    2. Mohieldin , Mahmoud & Rostom , Ahmed & Fu, Xiaochen & Iqbal, Zamir, 2012. "The Role of Islamic Finance in Enhancing Financial Inclusion in Organization of Islamic Cooperation (OIC) Countries," Islamic Economic Studies, The Islamic Research and Training Institute (IRTI), vol. 20, pages 55-120.
    3. Tripp,Charles, 2006. "Islam and the Moral Economy," Cambridge Books, Cambridge University Press, number 9780521682442, March.
    4. Tripp,Charles, 2006. "Islam and the Moral Economy," Cambridge Books, Cambridge University Press, number 9780521863773, March.
    5. Beck, Thorsten & Demirgüç-Kunt, Asli & Merrouche, Ouarda, 2013. "Islamic vs. conventional banking: Business model, efficiency and stability," Journal of Banking & Finance, Elsevier, vol. 37(2), pages 433-447.
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