Quantitative easing (QE) is a new instrument of macroeconomic policy which if not born in the aftermath of the 2008 crisis, was at least nurtured by this crisis. The paper looks at both the history and the theory of QE. We then examine its impact, both positive and negative on the economy. The use of QE helped governments deal with the immediate aftermath of the crisis and possibly prevented much sharper recessions than we witnessed. But in many ways its impact on the real economy has been limited and there are dangers in both the potential for substantial inflation to occur at some point in the future and the weakening of the financial sector. We argue that much of the literature misses the point that QE is funding government debt and spending, at a time when fiscal policy is in a period of, perhaps temporary, decline. Finally, we discuss whether QE will be a permanent feature of macroeconomic policy in the future, or whether it will be resorted to only occasionally?
- Central banks
- Unconventional monetary policies
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