Quantitative Easing Essay

2519 Words Aug 30th, 2010 11 Pages
A critical review of quantitative easing and its impact on the UK economy

Research proposal -

“A critical review of Quantitative easing and its impact on the UK’s economy”

Research background (Theory, concepts, Key issues, problems and researchable questions) -

Theory- During the recession flow of the money in the market is very less, hence central bank lend the money to the borrowers at low interest rates, but there is limitation they cannot go beyond zero percentage, hence central bank do “Quantitative Easing” that is printing of money and boost the money into market by purchasing the assets and buying the gilts or government debts.

Concepts- the main concept behind the Quantitative easing is to boost the money into the market
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In his research he finds why there is uncertainty in the monetary policies adopted by the UK. Banks are creating the money and landing in the market but it doesn’t mean that it will help in QE. Ending of QE is depend when MPC (monetary policy committee) realise it’s enough, which is based on the inflation and GDP growth. Bank unsure about their capacity on boosting a money, as per the analysis rise in the inflation above the targeted 2.0 pc has been noticed which shows there is no scope for QE otherwise it will result high inflation. Paul Fisher, the head of markets, suggested “There would still be a “quite a significant” degree of spare capacity over the forecast horizon.” Author has used qualitative exploratory research method.

Article of Jeremy Warner “Worried about the lack of growth not more quantitative easing.” In telegraph news paper published on 02 Nov 2009. In his research he has explain the issue on “Is Quantitative easing helping to stoke a renewed and dangerous bubble in asset prices? This is just one of the questions the Bank of England must attempt to answer in coming days.”(Jeremy Warner, 2009). Author has given the answer ‘yes’. QE is all about the stoking of assets price, for growth and development bubbles in assets are not advisable but it is not dangerous until escorted by the leverage, use of the debts. “To bears, QE

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