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Discussion Paper Details

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Title: QE: the story so far

Author(s): Andrew Haldane, Matt Roberts-Sklar, Tomasz Wieladek and Chris Young

Publication Date: December 2016

Keyword(s): central bank balance sheet, QE, Quantitative easing and Unconventional Monetary Policy

Programme Area(s): International Macroeconomics and Finance and Monetary Economics and Fluctuations

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.

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Bibliographic Reference

Haldane, A, Roberts-Sklar, M, Wieladek, T and Young, C. 2016. 'QE: the story so far'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=11691