Quantitative Easing by Bank of England: The Impact on Financial Market - Dissertation Example

Unemployment remained high. 84 % of SMEs did not have access to funding. Assets did increase and total spending improved. However, the inflation rate persisted in remaining high. Productive capacity was limited to market demand for products and services of most big companies. The manufacturing sector could not increase its capacity due to a lack of export demand. This formal study utilizes the many Tables and Charts showing statistics gathered by BoE and ONS, to come up with a qualitative and quantitative analysis of the effects of QE on the financial market.

QE was probably responsible for the high inflation as it seemed to have justified government imposition of additional VAT for two consecutive years, January 2010 and January 2011. The correlation tool was utilized to prove it. Actual QE impact on GDP was poor partly due to very limited transfer of money supply to income-earning endeavors with better than money market returns derived by banks. The actual QE impact on employment was also poor leaving the UK with high unemployment rates. 60 % of employment should have come from SMEs.

Instead, SMEs contributed only a small count of additional employment. Previous formal studies say it will take years for the additional money supply to have an apparently positive impact on GDP and employment. But it depends on the effectiveness of government interventions, which are mostly not within the scope of BoE and/or MPC. In the past two years, the global financial markets’ has impacted the world’s economies leading to a loss of liquidity in the financial markets and frustrated various economic and financial indicators including lower housing sales, poor corporate performance (operational, financial, and stock market performance), decreased consumer sales and spending which resulted in bad economy in some countries including United Kingdom (Hadar, 2009).