QE: The Story so Far

73 Pages Posted: 26 Oct 2016

See all articles by Andrew Haldane

Andrew Haldane

Bank of England

Matt Roberts-Sklar

Bank of England

Chris Young

Bank of England

Tomasz Wieladek

Bank of England

Multiple version iconThere are 2 versions of this paper

Date Written: October 19, 2016

Abstract

In the past decade or so, a number of central banks have purchased assets financed by the creation of central bank reserves as a tool for loosening monetary policy – a policy often known as ‘quantitative easing’ or ‘QE’. The first half of the paper reviews the international evidence on the impact on financial markets and economic activity of this policy. It finds that these central bank balance sheet expansions had a discernible and significant impact on financial markets and the economy. The second half of the paper provides new empirical analysis on the macroeconomic impact of central bank balance sheet expansions, across time and countries. It finds three key results. First, it is only when central bank balance sheet expansions are used as a monetary policy tool that they have a significant macro-economic impact. Second, there is evidence for the US that the effectiveness of QE may vary over time, depending on the state of the economy and liquidity of the financial system. And third, QE can have strong spill-over effects cross-border, acting mainly via financial channels. For example, the impact of US QE on UK economic activity may be as large as the impact on US economic activity.

Keywords: Quantitative Easing, QE, unconventional monetary policy, central bank balance sheet

JEL Classification: E60, E43, E44, E52, E58

Suggested Citation

Haldane, Andrew and Roberts-Sklar, Matt and Young, Chris and Wieladek, Tomasz, QE: The Story so Far (October 19, 2016). Bank of England Working Paper No. 624. Available at SSRN: https://ssrn.com/abstract=2858204 or http://dx.doi.org/10.2139/ssrn.2858204

Andrew Haldane (Contact Author)

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

Matt Roberts-Sklar

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

Chris Young

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

Tomasz Wieladek

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

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