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The Failure of Accommodative Monetary Policy Before Quantitative Easing (QE) and Its Success After; the “Pushing on a String Problem”

In: Why Fiscal Stimulus Programs Fail, Volume 1

Author

Listed:
  • John J. Heim

    (State University of New York)

Abstract

This chapter examines the success of accommodate monetary policy before and after the quantitative easing program was introduced. Data are presented to show it was a failure 1960–2007, but successful after that due to the huge size of the accommodation program after the QE program started in 2008, fully offsetting crowd out. This chapter also examines the “pushing on a string” problem that developed in the QE era. This problem limits of the FR’s ability to stimulate the economy when loanable funds are increased far in excess of the current demand for loans. It concludes large increases in reserves created by the FR during the QE period went unused because of insufficient demand, something tied strongly to the overall size of the economy.

Suggested Citation

  • John J. Heim, 2021. "The Failure of Accommodative Monetary Policy Before Quantitative Easing (QE) and Its Success After; the “Pushing on a String Problem”," Springer Books, in: Why Fiscal Stimulus Programs Fail, Volume 1, chapter 0, pages 147-161, Springer.
    • Handle: RePEc:spr:sprchp:978-3-030-65675-1_8
    DOI: 10.1007/978-3-030-65675-1_8
    as

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