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The Law and Economics of Quantitative Easing

Sheffield Institute of Corporate and Commercial Law Working Paper Series

26 Pages Posted: 9 Jul 2014 Last revised: 19 Feb 2016

Andrew Johnston

University of Sheffield - Law School

Trevor Pugh

University of Sheffield

Date Written: July 7, 2014

Abstract

In this paper we argue that, in substance, the Quantitative Easing (QE) programmes introduced by central banks around the world amount to monetary financing of government deficits. As such, these programmes are unlawful under the Treaty on the Functioning of the European Union (TFEU). However, we recognise that as a matter of practical politics, the CJEU would be unlikely to strike down a QE programme, were the ECB to launch one. Nonetheless, given our analysis, and given the distributive consequences that QE has had in the UK and US, we consider that the implementation of such a policy in the EU requires far greater public debate than is likely. The continued absence of debate is likely only to reinforce the view that central bank decision-making is outside the rule of law.

Keywords: Quantitative Easing, Monetary Policy, Financial Crisis, Central Banks, European Law

JEL Classification: E51, E52, E58

Suggested Citation

Johnston, Andrew and Pugh, Trevor, The Law and Economics of Quantitative Easing (July 7, 2014). Sheffield Institute of Corporate and Commercial Law Working Paper Series. Available at SSRN: https://ssrn.com/abstract=2463160 or http://dx.doi.org/10.2139/ssrn.2463160

Andrew Johnston (Contact Author)

University of Sheffield - Law School ( email )

Sheffield
United Kingdom

Trevor Pugh

University of Sheffield ( email )

17 Mappin Street
Sheffield, Sheffield S1 4DT
United Kingdom

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