A Structural Investigation of Quantitative Easing

Böhl, Gregor; Goy, Gavin; Strobel, Felix

doi:10.2139/ssrn.3782958

Cited by 4 publications

(2 citation statements)

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“…Theoretical relevance of this scientific paper is based upon previous scientific research of extensive functioning of the transmission mechanism of unconventional monetary policy, including fundamental analysis of the same or similar variables, whose aim is to distinguish the various channels through which Quantitative Easing affects the real economy, covering relevant sample periods during which QE was undertaken. Some of these fundamental models can be found in scientific papers created by Boehl, Goy, and Strobel (2021), Walker (2020), Baumeister and Benati (2013); Gambacorta, Hofmann, and Peersman (2014); Peersman (2011). In order to answer the question whether the Federal Reserve's Quantitative Easing (QE) in the aftermath of the financial crisis has macroeconomic effects, authors estimated a large-scale DSGE model over the sample from 1998 until 2020, including data of the Fed's balance sheet, and used nonlinear Bayesian likelihood approach which completely accounts for the zero lower bound on nominal interest rates.…”

Section: Methodsmentioning

confidence: 99%

Evaluating the Effectiveness of Quantitative Easing Measures of the Federal Reserve and the European Central Bank

Mulaahmetovic

2022

5002

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This scientific paper examined the relation between conventional and unconventional monetary policy, with an anticipation to provide a comprehensive assessment of how they behave with the goal of mitigating financial distress, at the state level, influencing global economy. The sampling frame involved five variables related to the US Federal Reserve and five variables related to the European Central Bank, observed during the period 2015-2020 (data for January, April, July and October of each year, regarding every research variable were collected). These variables included: Euro Area Inflation Rate, ECB Bonds Yields, Euro Area Broad Money Supply (M2), Euro Area Unemployment Rate, Debt to GDP; and US Inflation Rate, US Treasury Yields, US Broad Money Supply (M2), US Unemployment Rate, Debt to GDP. Accordingly, two adequate research models were created. Research methodology focused on examining the accuracy of the hypotheses using SmartPLS 3 as a tool for conducting mediation analysis. Research implications suggest that Quantitative Easing caused a significant increase in the Federal Reserve’s and European Central Bank’s balance sheet, especially during the global financial crisis (2007-2008) and during the post-crisis, recovery period. In terms of policy recommendations, monetary authorities need to have policy sets ready in place, in order to know how to behave during and post an economic crisis. This scientific paper will serve as an accurate source of information to future researchers in the field of conventional and unconventional monetary measures, because the work is well systematically organized, clear for interpretation and provides an extensive insight into the Fed’s and ECB’s transmission mechanisms of monetary policy.

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Section: Methodsmentioning

confidence: 99%

Evaluating the Effectiveness of Quantitative Easing Measures of the Federal Reserve and the European Central Bank

Mulaahmetovic

2022

5002

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“…According to the New Keynesian HANK model (DSGE) used by Cui and Sterk (2021), quantitative easing had a strong and positive effect on output and inflation in the United States during the economic crisis and in subsequent years. However, also using a DSGE model, Boehl et al (2020) highlight that, expansive financial shocks can have a disinflationary effect if supply effects dominate demand effects. The research based on vector autoregressive models used in this paper highlights the significant effects of the Federal Reserve's quantitative easing programmes on macroeconomic variables.…”

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confidence: 99%

The Relationship Between Asset Purchases, Monetary Aggregates, and Inflation Between 2007 and 2022 – an Example of the Federal Reserve

Csiki¹

2022

PFQ

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The large asset purchase programs following the 2008 crisis led to a significant expansion of money aggregates, which led to an appreciation of the relationship between inflation and money supply. In this study, I analysed the changes in monetary aggregates caused by quantitative easing, the framework for the implementation of monetary policy with ample reserves and their impact on price levels using a vector autoregressive (VAR) model between 2007 and 2022 based on data for the United States. The study includes the pandemic after 2020, however, due to the limited length of time available and the uncertainty of the effects, the focus of the study is on pre-pandemic processes. Inflation fears caused by the significant expansion of the money supply during the period were not substantiated due to the increase of excess reserves, the changing monetary policy operational framework and negative output gap. According to the model monetary aggregate shocks are built into inflation expectations, changes in the money aggregates caused by asset purchases help the central bank to reach its medium-term inflation target.

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On the time-varying effects of the ECB’s asset purchases

Zlobins

2023

Empir Econ

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A Structural Investigation of Quantitative Easing

Cited by 4 publications

References 34 publications

Evaluating the Effectiveness of Quantitative Easing Measures of the Federal Reserve and the European Central Bank

Evaluating the Effectiveness of Quantitative Easing Measures of the Federal Reserve and the European Central Bank

The Relationship Between Asset Purchases, Monetary Aggregates, and Inflation Between 2007 and 2022 – an Example of the Federal Reserve

On the time-varying effects of the ECB’s asset purchases

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