Quantitative Easing Essay

754 Words 4 Pages
This literature review explores the effect which quantitative easing has on modern economies during periods of economic crisis. It will discuss the most recent financial recession in 2008 and analyze the special asset purchase programs taken by central banks in an attempt to bring about economic recovery whilst also discussing the problems inherent in such a buy back strategy.

Keywords: Quantitative easing, QE, LSAP, GDP, economy, inflation, unemployment, recession, financial markets, asset prices, bubbles, equity prices, consumer, Bank of England, Federal Reserve, European Central Bank


Both the study and interest of Quantitative Easing (hereafter QE) has peaked dramatically in recent years. Primarily, due to the widespread use of QE economic strategies pertaining to the Federal Reserve (Fed), the Bank of England (BoE) and the European Central Bank (ECB), there has been an undeniable surge in the debating of the validity of the strategy by both scholars and industry professionals alike. The success of central bank’s asset purchasing policies are mostly perceived to decrease unemployment and boost economic activity; see (Kapetanios et al., 2012), (Joyce et al., 2012), (Gagnon et al., 2011) and others. It may be true that economic activity is increased as a result as a large asset purchasing program, but at what cost? There seems to
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However, more recent studies differ in this regard as both (Lanza et al. 2010) and (Swanson, 2011) conducted reviews on the use of the ECB’s LSAP, providing evidence using a BVAR model, that QE had positive effects in remedying financial market dysfunction. (Olsen, 2014) argues that although QE has a measurable effect on equity prices during the period of QE, it is not likely that these price increases

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