StudentShare
Contact Us
Sign In / Sign Up for FREE
Search
Go to advanced search...

Quantitative Easing - Decreasing Interest Rates - Research Paper Example

Comments (0) Cite this document
Summary
The paper "Quantitative Easing - Decreasing Interest Rates" presents quantitative easing that is an effective monetary policy to maintain lower interest rates and thereby to promote rapid economic growth provided that the theoretical assumptions are accurately met. …
Download full paperFile format: .doc, available for editing
GRAB THE BEST PAPER95.5% of users find it useful
Quantitative Easing - Decreasing Interest Rates
Read TextPreview

Extract of sample "Quantitative Easing - Decreasing Interest Rates"

Download file to see previous pages The practice is entirely different from the usual approach of purchasing and selling government bonds to maintain a targeted market interest rate. It must be emphasized that a central bank uses new electronically created money for the purchase of financial assets in order to implement quantitative easing policy. This practice is helpful for increasing excess bank reserves which in turn may lower yields. The ultimate goal of the quantitative easing policy is to cut down long-term interest rates so as to stimulate economic activities. For this purpose, monetary authorities purchase financial assets of longer maturity and thereby reduce long-term interest rates on the yield curve. In addition, the tool of quantitative easing is very helpful to ensure that inflation rate does not fall below the targeted level. This paper will analyze the pros and cons of quantitative easing and will discuss whether the Fed has a choice of using this tool in a highly recessionary economy. Benefits of Quantitative Easing As Elliott (2009) purports, the unconventional quantitative easing monetary policy may assists banks to keep excess reserves with them and hence to lend largely to businesses and individual borrowers. In turn, businesses will use these additional funds to finance productive activities including infrastructure development and R&D. Similarly, individual borrowers will use this new fund for their day to day activities or investment purposes. This will ensure effective circulation of money throughout the economy. Hence, these increased economic activities will certainly assist the economy to come out of stagnation and stimulate economic growth. Since this monetary tool is helpful to keep the inflation at a moderate level, it assists regulators to prevent the economy from falling into deflationary conditions. According to Kollewe (as cited in the guardian, 2009), US, UK, and Japan are very much interested in quantitative easing policies as a way to stabilize economic growth. The writer points out that the US was the first country which used quantitative easing as a response to its recessionary conditions. According to International Monetary Fund, the major developed countries that deployed the quantitative easing policy since the beginning of the 21st century were less affected by the 2008 global financial crisis as compared to other industrially developed economies. During the 2008 global financial crisis, it has been identified that the quantitative easing boosted the financial markets by adding liquidity. A weaker currency that amplified export demand is also identified to be one of the major desirable side effects of quantitative easing policy. To a certain extent, the quantitative easing technique has assisted economies to diminish unemployment rate. While analyzing the US economy, it is obvious that this unconventional monetary tool has played a crucial role in the economy in overcoming the dreadful impacts of the 2008 global financial crisis. As per the report of Hermansson (2010), economists hold the view that US’ entire budget deficit would be funded for a fiscal year, if the quantitative easing has been set as high as $1 trillion. In order to take advantages of the quantitative easing policy, the Fed used the returns of previous bond purchases to acquire new long-term financial assets in 2010.  ...Download file to see next pagesRead More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“Quantitative Easing - Decreasing Interest Rates Research Paper”, n.d.)
Quantitative Easing - Decreasing Interest Rates Research Paper. Retrieved from https://studentshare.org/macro-microeconomics/1437018-quantitative-easing-decreasing-interest-rates-to
(Quantitative Easing - Decreasing Interest Rates Research Paper)
Quantitative Easing - Decreasing Interest Rates Research Paper. https://studentshare.org/macro-microeconomics/1437018-quantitative-easing-decreasing-interest-rates-to.
“Quantitative Easing - Decreasing Interest Rates Research Paper”, n.d. https://studentshare.org/macro-microeconomics/1437018-quantitative-easing-decreasing-interest-rates-to.
  • Cited: 0 times
Comments (0)
Click to create a comment or rate a document

CHECK THESE SAMPLES OF Quantitative Easing - Decreasing Interest Rates

The Importance of Exchange Rates Regimes for Trade

... that primarily facilitate these international activities is the exchange rate. Mishkin (2003) defines the exchange rate as the price of one currency in terms of another (say euros per dollar) and it is in the foreign exchange market that they are determined. In terms of monetary policy (management of money and interest rates), the exchange rate is managed by a country through its exchange rate regime, an organized set of rules through which a nation’s exchange rate is established, especially the way the monetary or other government authorities are or are not involved in the foreign exchange market. These regimes include floating exchange rates, pegged exchange rates, managed float, crawling peg, currency board and exchange controls...
10 Pages(2500 words)Assignment

Political Parties and the Size of Government: Quantitative Approaches and Policy Analysis

This paper intends to address the question “ Is there a correlation between political parties and government size in terms of public policies being made and undertaken by the government?” This particular question is of vital importance since it has been noted that politics and government in the United States have dramatically changed. In fact, it has been claimed “not only the size of the government has changed in the past 15 years, growing markedly as a share in the GNP but also the role of government has changed as well” (Roubini & Sachs, 1989 p 109). And the change that they are referring to is the marked attribute of the United States government – a divided government.

In this light...
12 Pages(3000 words)Term Paper

Equitable Interest in the Property and the Land Law

On a preliminary basis, it would appear that due to the provisions of the Land Registration Act of 2002, Neville will have no claim on the estate at all, since his interests have not been registered and the title was vested only in Harry, Ton and Hermoine – all of which was transferred to Hermoine and then to the new owner, Draco.

However, in the case of Re 139 High Street, Deptford2, it was established that there had been a mistake in the conveyancing transaction and that one annexe on the property actually did not belong to the registered owner, who was the legal owner of the land. The owner of the annexe then asked for the register to be amended and this was done accordingly, in recognition of his interest beca...
6 Pages(1500 words)Case Study

Importance and Changes in the Level of Interest Rates to Banking and Insurance Sector in the UK

Indicatively, Ahiakport (2003, 42) noticed that “interest is compensation for the use of capital; not necessarily money”. Moreover, the above researcher mentioned that in general “quantity of money determines the supply of liquid resources, and hence the rate of interest, and in conjunction with other factors (particularly that of confidence) the inducement to invest” (Ahiakport, 2003, 55). In other words, interest rates are related to the capital both directly and indirectly. The direct relation refers to the increase of capital under the influence of specific interest rates, while the indirect relation can be assumed by the ‘attraction’ of foreign funds in a particular country due to high-inte...
14 Pages(3500 words)Term Paper

Methodological Approach in a Quantitative Research

...Methodological approach Introduction: A research is a continuous human effort to invent or discover something new on any aspect related to the area of study. A research involves application of the knowledge of the researcher on the topic under study. Research may be related to any discipline. The time frame of the research may vary according to the topic, scope and requirement of the research. Research can be basically classified into two namely- qualitative and quantitative. (Tesch). A qualitative research is one in which the researcher analyses the pattern of behavior or other human and behavioral aspects. “Qualitative research allows you to explore perceptions, attitudes and motivations and to understand how they are formed.” (Kivlichan...
9 Pages(2250 words)Report

Project Risk Assessment: Qualitative Versus Quantitative Approach

The risks may vary in terms of nature or scope according to the situation. So since the risk is so common in project management, a very important aspect of managing a project is analyzing all the possible risks that are associated with that particular project. It makes no sense of going on with a project and not giving a thought to the risks that could affect the success. Once these risks are analyzed, the project manager will have all the possible risks in front of him. He will know the degree of risk and also the benefits that the organization will get if the risk is taken. Therefore only after a risk analysis, the project manager is in a position to conclude whether or not it is worth taking the risk and going on with a certain...
6 Pages(1500 words)Assignment

Difference Between Quantitative and Qualitative Analysis

...Question number Difference between quantitative and qualitative analysis In data analysis, there are two most common types of analysis used: quantitative analysis and qualitative analysis. The other analysis is not superior to the other but the combination of both will exactly make a much better analysis. There are many reasons to use quantitative analysis. The world is composed of numerical data and in order to understand and make use of them, quantitative analysis is a powerful tool that can present and interpret them. In its general and broad definition, quantitative analysis is simply a way of giving measurement to things (Investopedia, par. 3). With this definition, it is implied that in the field of business or financial...
7 Pages(1750 words)Assignment

A Framework for Critiquing Quantitative Research Papers

Relevant information of methods used from the Multifactorial Attitudes Questionnaire, Kruskal- Wallis test to ordinal regression have been elaborated.  The results, conclusions, and recommendations are clarified in the research work. Potential benefit is that it makes participants recognize that old need to be given care and inspire attitude change. The harm is that the participants may demand more from their employees relating to the topic. Approval of the Ethics Committee is noted. The findings are categorically explained. The themes include ageism, resources, professional esteem, and working environment. The findings have been explained under each sub-heading. The data have been presented with regard to each question an...

13 Pages(3250 words)Assignment

Sexual Interest in Children

The question of what happens to the cases has attracted the attention of many people calling for massive research in the field.
The many people with no information are a clear sign of abrasion that children go through unnoticed. With regard to capacity building and awareness on sexual harassment, 95% believe there no satisfactory programs aimed at enhancing the ability of children to recognize and report sexual related cases. In this light, 80% believe the inclusion of sex education plays an important role in stimulating and enhancing children’s cognitive ability. On the other hand, others think the inclusion of such programs exposes children to bad things that corrupt their morals. Notably, 60% are on the view that se...
7 Pages(1750 words)Assignment

Reduction in Violent Crime Rates in El Salvador

Thus, it is extremely important to reduce the crime rates of a nation to provide relief to its citizens and also to improve the economic performance of the country. It is situated between the Honduras and Guatemala and is bordered by the North Pacific Ocean and its capital city is Sal Salvador (globalEDGE, 2013). El Salvador is considered one of the most violent countries in the world and is rated as “critical for crime” by the U.S. Department of State (OSAC, 2013).
The country achieved independence in 1821 from Spain and political and military reforms took place after the 12- year long civil war ended in 1992. The per capita murder rate is “69 per 100,000” in El Salvador in 2012 which is the sec...
7 Pages(1750 words)Assignment
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.

Let us find you another Research Paper on topic Quantitative Easing - Decreasing Interest Rates for FREE!

Contact Us