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Quantitative easing
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Quantitative easing (QE) is an unconventional monetary policy used by a central bank to stimulate an economy when standard monetary policy has become ineffective. A central bank implements quantitative easing by buying specified amounts of financial assets from commercial banks and other private institutions, thus raising the prices of those financial assets and lowering their yield, while simultaneously increasing the monetary base. This differs from the more usual policy of buying or selling short-term government bonds in order to keep interbank interest rates at a specified target value.Expansionary monetary policy to stimulate the economy typically involves the central bank buying short-term government bonds in order to lower short-term market interest rates. However, when short-term interest rates reach or approach zero, this method can no longer work. In such circumstances monetary authorities may then use quantitative easing to further stimulate the economy by buying assets of longer maturity than short-term government bonds, thereby lowering longer-term interest rates further out on the yield curve.Quantitative easing can help ensure that inflation does not fall below a target. Risks include the policy being more effective than intended in acting against deflation (leading to higher inflation in the longer term, due to increased money supply), or not being effective enough if banks do not lend out the additional reserves. According to the International Monetary Fund and various economists, quantitative easing undertaken since the global financial crisis of 2007–08 has mitigated some of the adverse effects of the crisis.
^ King, Mervyn (25 October 2011). "No guarantee bank lending will rise, says Mervyn King". BBC News.
^ "Loose thinking". The Economist. 15 October 2009.
^ Publications | Learning the Lessons from QE and Other Unconventional Monetary Policies: 17–18 November. Bank of England (18 November 2011).
^ Elliott, Larry (8 January 2009). "Guardian Business Glossary: Quantitative Easing". The Guardian (London). Retrieved 19 January 2009.
^ Bank of England (27 May 2013). "Quantitative easing – injecting money into the economy". bankofengland.co.uk.
^ Quantitative Easing Explained. London: Bank of England. 2011. The MPC's decision to inject money directly into the economy does not involve printing more banknotes. Instead, the Bank buys assets from private sector institutions – that could be insurance companies, pension funds, banks or non-financial firms – and credits the seller's bank account.
^ "Quantitative Easing". Bank of England. The Bank can create new money electronically by increasing the balance on a reserve account. So when the Bank purchases an asset from a bank, for example, it simply credits that bank's reserve account with the additional funds. This generates an expansion in the supply of central bank money
^ Cite error: The named reference bbcnews was invoked but never defined (see the help page).
^ a b "Quantitative Easing Explained". Bank of England. This does not involve printing more banknotes. Instead the Bank pays for these assets by creating money electronically and crediting the accounts of the companies it bought the assets from.
^ Open market operations: A Glossary of Political Economy Terms – Dr. Paul M. Johnson. Auburn.edu.
^ Open Market Operation – Fedpoints. Federal Reserve Bank of New York.
^ Monetary policy Instruments. Swiss National Bank.
^ The implementation of monetary policy in the euro area. European Central Bank. 2008. pp. 14–19.
^ BBC (6 March 2013). "What is quantitative easing?". bbc.co.uk.
^ "Dr. Econ: I noticed that banks have dramatically increased their excess reserve holdings. Is this buildup of reserves related to monetary policy?". Federal Reserve Bank of San Francisco. March 2010. Retrieved 4 April 2011.
^ Bernanke, Ben (13 January 2009). "The Crisis and the Policy Response". Federal Reserve. Retrieved 4 April 2011.
^ Bowlby, Chris (5 March 2009). "The fear of printing too much money". BBC News. Retrieved 25 June 2011.
^ Isidore, Chris (5 October 2010). "Federal Reserve move toward quantitative easing poses risks". CNNMoney.com. Retrieved 25 June 2011.
^ Unconventional Choices for Unconventional Times: Credit and Quantitative Easing in Advanced Economies; by Vladimir Klyuev, Phil de Imus, and Krishna Srinivasan; IMF Staff Position Note SPN/09/27; 4 November 2009.. (PDF).
^ "Evaluating Large-Scale Asset Purchases," 11 October 2012
^ Feldstein, Martin (24 February 2011). "Quantitative Easing and America's Economic Rebound". project-syndicate.org. Project Syndicate. Retrieved 4 April 2011.
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