Quantitative Easing Monetary Policy: Difference between revisions

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=== 2013 ===
=== 2013 ===
* http://en.wikipedia.org/wiki/Quantitative_easing
* http://en.wikipedia.org/wiki/Quantitative_easing
** '''Quantitative easing</B> ('''QE</B>) is an unconventional [[monetary policy]] used by [[central bank]]s to stimulate [[the economy]] when standard monetary policy has become ineffective.<ref>{{cite web|last=King|first=Mervyn|title=No guarantee bank lending will rise, says Mervyn King|url=http://www.bbc.co.uk/news/business-15446545}}</ref><ref>{{cite news| url=http://www.economist.com/node/14649284 | work=The Economist | title=Loose thinking | date=15 October 2009}}</ref><ref>[http://www.bankofengland.co.uk/publications/events/QEConference/index.htm Publications | Learning the Lessons from QE and Other Unconventional Monetary Policies: 17–18 November]. Bank of England (18 November 2011).</ref> A central bank implements quantitative easing by buying specified amounts of [[financial asset]]s from [[bank|commercial banks]] and other private institutions, thus increasing the [[monetary base]] and lowering the [[Yield (finance)|yield]] on those financial assets.<ref>{{cite web | url=http://www.bankofengland.co.uk/education/Documents/targettwopointzero/t2p0_qe_supplement.pdf | title =Quantitative easing – injecting money into [[the economy]] | author =''[[Bank of England]]'' | publisher =bankofengland.co.uk | date =27 May 2013}}</ref> This is distinguished from the more usual policy of buying or selling [[government bond]]s in order to keep market interest rates at a specified target value.<ref name="BOE QE Explained (pdf)">{{cite book|title=Quantitative Easing Explained |year=2011 |publisher=[[Bank of England]] |location=London |quote=The MPC's decision to inject money directly into [[the economy]] does not involve printing more banknotes. Instead, the Bank buys assets from private sector institutions – that could be insurance companies, pension funds, banks or non-financial firms – and credits the seller's bank account. |url=http://www.bankofengland.co.uk/monetarypolicy/pdf/qe-pamphlet.pdf}}</ref><ref>{{cite web |title=Quantitative Easing|url=http://www.bankofengland.co.uk/publications/quarterlybulletin/qb090201.pdf |publisher=[[Bank of England]]|quote=The Bank can create new money electronically by increasing the balance on a reserve account. So when the Bank purchases an asset from a bank, for example, it simply credits that bank's reserve account with the additional funds. This generates an expansion in the supply of central bank money}}</ref> <ref name="BOE QE Explained (web)">{{cite web |title=Quantitative Easing Explained |url=http://www.bankofengland.co.uk/monetarypolicy/assetpurchases.htm |publisher=[[Bank of England]]|quote=This does not involve printing more banknotes. Instead the Bank pays for these assets by creating money electronically and crediting the accounts of the companies it bought the assets from.}}</ref>          <P>        [[Expansionary monetary policy]] typically involves the central bank buying short-term government bonds in order to lower short-term market interest rates.<ref>[http://www.auburn.edu/~johnspm/gloss/open_market_operations Open market operations: A Glossary of Political Economy Terms – Dr. Paul M. Johnson]. Auburn.edu.</ref><ref name="omofed">[http://www.newyorkfed.org/aboutthefed/fedpoint/fed32.html Open Market Operation – Fedpoints]. Federal Reserve Bank of New York.</ref><ref>[http://www.snb.ch/en/iabout/monpol/id/monpol_instr Monetary policy Instruments]. Swiss National Bank.</ref><ref name="omoecb">{{cite book|title=The implementation of monetary policy in the euro area|year=2008|publisher=European Central Bank|pages=14–19}}</ref> However, when short-term interest rates are at or close to [[zero interest rate policy|zero]], normal [[monetary policy]] can no longer lower interest rates.<ref>{{cite web | url=http://www.bbc.co.uk/news/business-15198789 | title =What is quantitative easing? | author =''[[BBC]]'' | publisher =bbc.co.uk | date =6 March 2013}}</ref> Quantitative easing may then be used by monetary authorities to further stimulate [[the economy]] by purchasing assets of longer maturity than short-term government bonds, and thereby lowering longer-term interest rates further out on the [[yield curve]].<ref name="Q&A: Quantitative easing">{{cite web|url=http://www.frbsf.org/education/activities/drecon/2010/0310.html|title=Dr. Econ: I noticed that banks have dramatically increased their excess reserve holdings. Is this buildup of reserves related to monetary policy?|date=March 2010|publisher=[[Federal Reserve Bank of San Francisco]]|accessdate=4 April 2011}}</ref><ref name="federalreserve.gov">{{cite web|url=http://www.federalreserve.gov/newsevents/speech/bernanke20090113a.htm|title=The Crisis and the Policy Response|last=Bernanke|first=Ben|date=13 January 2009|publisher=[[Federal Reserve]]|accessdate=4 April 2011}}</ref> Quantitative easing raises the prices of the financial assets bought, which lowers their [[Yield (finance)|yield]].<ref name="guardiannews">{{cite news |title=Guardian Business Glossary: Quantitative Easing |url=http://www.guardian.co.uk/business/2008/oct/14/businessglossary |work=The Guardian |accessdate=19 January 2009 | location=London | first=Larry | last=Elliott | date=8 January 2009}}</ref>          <P>          Quantitative easing can be used to help ensure that inflation does not fall below target.<ref name="BOE QE Explained (web)"/> Risks include the policy being more effective than intended in acting against [[deflation]] (leading to higher inflation in the longer term, due to increased money supply),<ref name="bowlby fear">{{cite news |url=http://news.bbc.co.uk/2/hi/business/7925981.stm |last=Bowlby |first=Chris |title=The fear of printing too much money |publisher=BBC News |date=5 March 2009 |accessdate=25 June 2011}}</ref> or not being effective enough if banks do not [[loan|lend]] out the additional reserves.<ref>{{cite news |url=http://money.cnn.com/2010/10/05/news/economy/Fed_quantitative_easing/index.htm |first=Chris |last=Isidore |publisher=CNNMoney.com |title= Federal Reserve move toward quantitative easing poses risks |date=5 October 2010 |accessdate=25 June 2011}}</ref> According to the IMF and various other [[economist]]s, quantitative easing undertaken since the global [[financial crisis of 2007–08]] has mitigated some of the adverse effects of the crisis.<ref name="imf">[http://www.imf.org/external/pubs/ft/spn/2009/spn0927.pdf Unconventional Choices for Unconventional Times: Credit and Quantitative Easing in Advanced Economies; by Vladimir Klyuev, Phil de Imus, and Krishna Srinivasan; IMF Staff Position Note SPN/09/27; 4 November 2009.]. (PDF).</ref><ref name="federalreserve">[http://www.federalreserve.gov/newsevents/speech/stein20121011a.htm "Evaluating Large-Scale Asset Purchases," 11 October 2012]</ref><ref name="project-syndicate">{{cite web |url= http://www.project-syndicate.org/commentary/feldstein33/English |title=Quantitative Easing and America's Economic Rebound |first=Martin |last=Feldstein |work=project-syndicate.org |publisher=Project Syndicate |date=24 February 2011 |accessdate=4 April 2011}}</ref>
** '''Quantitative easing</B> ('''QE</B>) is an unconventional [[monetary policy]] used by [[central bank]]s to stimulate [[the economy]] when standard monetary policy has become ineffective.<ref>{{cite web|last=King|first=Mervyn|title=No guarantee bank lending will rise, says Mervyn King|url=http://www.bbc.co.uk/news/business-15446545}}</ref><ref>{{cite news| url=http://www.economist.com/node/14649284 | work=The Economist | title=Loose thinking | date=15 October 2009}}</ref><ref>[http://www.bankofengland.co.uk/publications/events/QEConference/index.htm Publications | Learning the Lessons from QE and Other Unconventional Monetary Policies: 17–18 November]. Bank of England (18 November 2011).</ref> A central bank implements quantitative easing by buying specified amounts of [[financial asset]]s from [[bank|commercial banks]] and other private institutions, thus increasing the [[monetary base]] and lowering the [[Yield (finance)|yield]] on those financial assets.<ref>{{cite web | url=http://www.bankofengland.co.uk/education/Documents/targettwopointzero/t2p0_qe_supplement.pdf | title =Quantitative easing – injecting money into [[the economy]] | author =''[[Bank of England]]'' | publisher =bankofengland.co.uk | date =27 May 2013}}</ref> This is distinguished from the more usual policy of buying or selling [[government bond]]s in order to keep market interest rates at a specified target value.<ref name="BOE QE Explained (pdf)">{{cite book|title=Quantitative Easing Explained |year=2011 |publisher=[[Bank of England]] |location=London |quote=The MPC's decision to inject money directly into [[the economy]] does not involve printing more banknotes. Instead, the Bank buys assets from private sector institutions – that could be insurance companies, pension funds, banks or non-financial firms – and credits the seller's bank account. |url=http://www.bankofengland.co.uk/monetarypolicy/pdf/qe-pamphlet.pdf}}</ref><ref>{{cite web |title=Quantitative Easing|url=http://www.bankofengland.co.uk/publications/quarterlybulletin/qb090201.pdf |publisher=[[Bank of England]]|quote=The Bank can create new money electronically by increasing the balance on a reserve account. So when the Bank purchases an asset from a bank, for example, it simply credits that bank's reserve account with the additional funds. This generates an expansion in the supply of central bank money}}</ref> <ref name="BOE QE Explained (web)">{{cite web |title=Quantitative Easing Explained |url=http://www.bankofengland.co.uk/monetarypolicy/assetpurchases.htm |publisher=[[Bank of England]]|quote=This does not involve printing more banknotes. Instead the Bank pays for these assets by creating money electronically and crediting the accounts of the companies it bought the assets from.}}</ref>          <P>          [[Expansionary monetary policy]] typically involves the central bank buying short-term government bonds in order to lower short-term market interest rates.<ref>[http://www.auburn.edu/~johnspm/gloss/open_market_operations Open market operations: A Glossary of Political Economy Terms – Dr. Paul M. Johnson]. Auburn.edu.</ref><ref name="omofed">[http://www.newyorkfed.org/aboutthefed/fedpoint/fed32.html Open Market Operation – Fedpoints]. Federal Reserve Bank of New York.</ref><ref>[http://www.snb.ch/en/iabout/monpol/id/monpol_instr Monetary policy Instruments]. Swiss National Bank.</ref><ref name="omoecb">{{cite book|title=The implementation of monetary policy in the euro area|year=2008|publisher=European Central Bank|pages=14–19}}</ref> However, when short-term interest rates are at or close to [[zero interest rate policy|zero]], normal [[monetary policy]] can no longer lower interest rates.<ref>{{cite web | url=http://www.bbc.co.uk/news/business-15198789 | title =What is quantitative easing? | author =''[[BBC]]'' | publisher =bbc.co.uk | date =6 March 2013}}</ref> Quantitative easing may then be used by monetary authorities to further stimulate [[the economy]] by purchasing assets of longer maturity than short-term government bonds, and thereby lowering longer-term interest rates further out on the [[yield curve]].<ref name="Q&A: Quantitative easing">{{cite web|url=http://www.frbsf.org/education/activities/drecon/2010/0310.html|title=Dr. Econ: I noticed that banks have dramatically increased their excess reserve holdings. Is this buildup of reserves related to monetary policy?|date=March 2010|publisher=[[Federal Reserve Bank of San Francisco]]|accessdate=4 April 2011}}</ref><ref name="federalreserve.gov">{{cite web|url=http://www.federalreserve.gov/newsevents/speech/bernanke20090113a.htm|title=The Crisis and the Policy Response|last=Bernanke|first=Ben|date=13 January 2009|publisher=[[Federal Reserve]]|accessdate=4 April 2011}}</ref> Quantitative easing raises the prices of the financial assets bought, which lowers their [[Yield (finance)|yield]].<ref name="guardiannews">{{cite news |title=Guardian Business Glossary: Quantitative Easing |url=http://www.guardian.co.uk/business/2008/oct/14/businessglossary |work=The Guardian |accessdate=19 January 2009 | location=London | first=Larry | last=Elliott | date=8 January 2009}}</ref>          <P>          Quantitative easing can be used to help ensure that inflation does not fall below target.<ref name="BOE QE Explained (web)"/> Risks include the policy being more effective than intended in acting against [[deflation]] (leading to higher inflation in the longer term, due to increased money supply),<ref name="bowlby fear">{{cite news |url=http://news.bbc.co.uk/2/hi/business/7925981.stm |last=Bowlby |first=Chris |title=The fear of printing too much money |publisher=BBC News |date=5 March 2009 |accessdate=25 June 2011}}</ref> or not being effective enough if banks do not [[loan|lend]] out the additional reserves.<ref>{{cite news |url=http://money.cnn.com/2010/10/05/news/economy/Fed_quantitative_easing/index.htm |first=Chris |last=Isidore |publisher=CNNMoney.com |title= Federal Reserve move toward quantitative easing poses risks |date=5 October 2010 |accessdate=25 June 2011}}</ref> According to the IMF and various other [[economist]]s, quantitative easing undertaken since the global [[financial crisis of 2007–08]] has mitigated some of the adverse effects of the crisis.<ref name="imf">[http://www.imf.org/external/pubs/ft/spn/2009/spn0927.pdf Unconventional Choices for Unconventional Times: Credit and Quantitative Easing in Advanced Economies; by Vladimir Klyuev, Phil de Imus, and Krishna Srinivasan; IMF Staff Position Note SPN/09/27; 4 November 2009.]. (PDF).</ref><ref name="federalreserve">[http://www.federalreserve.gov/newsevents/speech/stein20121011a.htm "Evaluating Large-Scale Asset Purchases," 11 October 2012]</ref><ref name="project-syndicate">{{cite web |url= http://www.project-syndicate.org/commentary/feldstein33/English |title=Quantitative Easing and America's Economic Rebound |first=Martin |last=Feldstein |work=project-syndicate.org |publisher=Project Syndicate |date=24 February 2011 |accessdate=4 April 2011}}</ref>
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Latest revision as of 01:51, 27 February 2024

A Quantitative Easing Monetary Policy is a printing money policy (by a central bank) that is used to purchase financial assets from private financial institution (such as commercial banks).



References

2016

2013

  • http://en.wikipedia.org/wiki/Quantitative_easing
    • Quantitative easing (QE) is an unconventional monetary policy used by central banks to stimulate the economy when standard monetary policy has become ineffective.[1][2][3] A central bank implements quantitative easing by buying specified amounts of financial assets from commercial banks and other private institutions, thus increasing the monetary base and lowering the yield on those financial assets.[4] This is distinguished from the more usual policy of buying or selling government bonds in order to keep market interest rates at a specified target value.[5][6] [7]

       Expansionary monetary policy typically involves the central bank buying short-term government bonds in order to lower short-term market interest rates.[8][9][10][11] However, when short-term interest rates are at or close to zero, normal monetary policy can no longer lower interest rates.[12] Quantitative easing may then be used by monetary authorities to further stimulate the economy by purchasing assets of longer maturity than short-term government bonds, and thereby lowering longer-term interest rates further out on the yield curve.[13][14] Quantitative easing raises the prices of the financial assets bought, which lowers their yield.[15]

      Quantitative easing can be used to help ensure that inflation does not fall below target.[7] Risks include the policy being more effective than intended in acting against deflation (leading to higher inflation in the longer term, due to increased money supply),[16] or not being effective enough if banks do not lend out the additional reserves.[17] According to the IMF and various other economists, quantitative easing undertaken since the global financial crisis of 2007–08 has mitigated some of the adverse effects of the crisis.[18][19][20]

  1. King, Mervyn. "No guarantee bank lending will rise, says Mervyn King". http://www.bbc.co.uk/news/business-15446545. 
  2. Template:Cite news
  3. Publications | Learning the Lessons from QE and Other Unconventional Monetary Policies: 17–18 November. Bank of England (18 November 2011).
  4. Bank of England (27 May 2013). "Quantitative easing – injecting money into the economy". bankofengland.co.uk. http://www.bankofengland.co.uk/education/Documents/targettwopointzero/t2p0_qe_supplement.pdf. 
  5. Quantitative Easing Explained. London: Bank of England. 2011. http://www.bankofengland.co.uk/monetarypolicy/pdf/qe-pamphlet.pdf. "The MPC's decision to inject money directly into the economy does not involve printing more banknotes. Instead, the Bank buys assets from private sector institutions – that could be insurance companies, pension funds, banks or non-financial firms – and credits the seller's bank account." 
  6. "Quantitative Easing". Bank of England. http://www.bankofengland.co.uk/publications/quarterlybulletin/qb090201.pdf. "The Bank can create new money electronically by increasing the balance on a reserve account. So when the Bank purchases an asset from a bank, for example, it simply credits that bank's reserve account with the additional funds. This generates an expansion in the supply of central bank money" 
  7. Jump up to: 7.0 7.1 "Quantitative Easing Explained". Bank of England. http://www.bankofengland.co.uk/monetarypolicy/assetpurchases.htm. "This does not involve printing more banknotes. Instead the Bank pays for these assets by creating money electronically and crediting the accounts of the companies it bought the assets from." 
  8. Open market operations: A Glossary of Political Economy Terms – Dr. Paul M. Johnson. Auburn.edu.
  9. Open Market Operation – Fedpoints. Federal Reserve Bank of New York.
  10. Monetary policy Instruments. Swiss National Bank.
  11. The implementation of monetary policy in the euro area. European Central Bank. 2008. pp. 14–19. 
  12. BBC (6 March 2013). "What is quantitative easing?". bbc.co.uk. http://www.bbc.co.uk/news/business-15198789. 
  13. "Dr. Econ: I noticed that banks have dramatically increased their excess reserve holdings. Is this buildup of reserves related to monetary policy?". Federal Reserve Bank of San Francisco. March 2010. http://www.frbsf.org/education/activities/drecon/2010/0310.html. Retrieved 4 April 2011. 
  14. Bernanke, Ben (13 January 2009). "The Crisis and the Policy Response". Federal Reserve. http://www.federalreserve.gov/newsevents/speech/bernanke20090113a.htm. Retrieved 4 April 2011. 
  15. Template:Cite news
  16. Template:Cite news
  17. Template:Cite news
  18. Unconventional Choices for Unconventional Times: Credit and Quantitative Easing in Advanced Economies; by Vladimir Klyuev, Phil de Imus, and Krishna Srinivasan; IMF Staff Position Note SPN/09/27; 4 November 2009.. (PDF).
  19. "Evaluating Large-Scale Asset Purchases," 11 October 2012
  20. Feldstein, Martin (24 February 2011). "Quantitative Easing and America's Economic Rebound". project-syndicate.org. Project Syndicate. http://www.project-syndicate.org/commentary/feldstein33/English. Retrieved 4 April 2011.