Oct 14 · Last update 13 days ago.

What is quantitative easing?

Quantitative easing (QE) is becoming an increasingly common monetary policy tool that can help an economy out of recession by managing inflation. Despite similar policies being used during the Great Depression of the 1930s, the Bank of Japan first defined the term “quantitative easing” during the Lost Decade of economic stagnation in the 2000s, an attempt to create economic growth and inflation in a Japanese economy defined by chronic deflation and low growth. Various monetary institutions have claimed that QE helped to alleviate a lot of the economic problems following the 2008 global financial crisis, and numerous central banks have already started to us QE in response to the COVID-19 economic downturn. What is quantitative easing? What impact does QE have on an economy? How will QE affect post-pandemic economic recoveries?
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Asset purchasing by banks allows growth and inflation
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Asset purchasing by banks allows growth and inflation

Quantitative easing is an unconventional monetary policy tool whereby central banks purchase government and corporate bonds, increasing the supply of money in an economy, which in a large enough quantity will raise inflation and stimulate economic activity. QE has been used when other policies are not effective or sufficient, and in times of an unprecedented global pandemic the US, UK, and EU, and a growing number of emergent economies have all put QE packages in place. The pandemic poses formidable challenges to the strongest economies and policymakers, and all economies should be open to trying new monetary tools to deal with the crisis, as traditional policies of fiscal austerity and exchange rate depreciation may not be suited. As long as such stimulus packages are used to target sustainable and growth sectors of these economies, QE should not raise additional negative impacts and should help economies foster the innovation that will secure growth in the long term.

markets.businessinsider.com/news/interestrates/ecb-unveils-stimulus-boost-to-overcome-covid-19-shock-1028990140?op=1# mercatus.org/publications/covid-19-policy-brief-series/reforming-feds-toolkit-and-quantitative-easing-practices wri.org/blog/2020/05/coronavirus-responsible-quantitative-easing bruegel.org/2020/07/credible-emerging-market-central-banks-could-embrace-quantitative-easing-to-fight-covid-19

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