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.
Nobody downloaded yet

Quantitative Easing - Decreasing Interest Rates - Research Paper Example

Comments (0)
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 paper
GRAB THE BEST PAPER
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
Comments (0)
Click to create a comment or rate a document
CHECK THESE SAMPLES - THEY ALSO FIT YOUR TOPIC
Effects of Quantitative Easing on Food Prices
In most cases, the central bank tends to employ this form of policy in a situation where the interest rates do not show any probability of making the expected results. Use of quantitative easing is associated with various risks including having a fixed amount of various goods intended for sales.
4 Pages(1000 words)Research Paper
Effects of quantitative easing on food prices
Quantitative easing has many negative effects on consumers, especially those approaching retirement and those who have savings. This paper focuses on how it influences change in food prices. In 2011, the president of Euro Pacific Capital Peter Schiff states that the instability in the commodities market is influenced by the nations that print much money and demean their currencies.
4 Pages(1000 words)Research Paper
Research and write the effects of the money policies applied by the Fed
Fed employs the following monetary policy tools to maintain economic stability: defining a discount rate, establishing reserves requirements and open market operations (Brezina p.52). Therefore, this research will focus to investigate effects of the monetary policies applied by the Fed as discussed below under several sub-headings.
9 Pages(2250 words)Research Paper
The role of quantitative easing in distorting equity markets leading to a distortion in the labor market
However, since mid 2009, these economies are showing signs of recovery, although fragile. The problems that are still persistent are high rate of unemployment, low investment, low inflation and income level. According to experts, this economic growth rate is insufficient for bringing high standards of economic performance in these economies.
10 Pages(2500 words)Research Paper
Effects of quantitative easing on food prices
Economic and finance ministers from the G20 nations are conducted a meeting in Argentina to discuss the increasing volatility among food and commodity prices. Food prices are no longer depended on the traditional economic motion of supply and demand in a market.
4 Pages(1000 words)Research Paper
US Economic Policy Impact on Asian Economies
This paper focuses on the qualitative evaluation of U.S. current economic policies towards Asian economies. In the age of globalization, the growth of the developed nations became sustainable and the scope for progress of the developing nations improved. The changes in the state of affairs in US greatly affected the Asian economies.
6 Pages(1500 words)Research Paper
Economics
Recessionary phase of business cycle often results into decline in growth, increase in unemployment as well as a general increase in the price levels besides resulting into crumbling of stock markets (Blanchard). The recession also results
4 Pages(1000 words)Research Paper
International Money and Capital Markets
One of the important aspects of an economy that highlights its growth prospect in context of international business is gross national product or gross national income. Unlike Gross Domestic Product, GNP takes in consideration foreign trade activities.
8 Pages(2000 words)Research Paper
International Finance
This implies that foreign direct investment is about injecting capital from one country to another in order to gain controlling interest in the firm that the capital is being sent to. Typically, FDI moves from industrialized nations in Europe and North America
9 Pages(2250 words)Research Paper
The influence of quantitative easing monetary policy on Japan and the United States
financial assets from commercial banks and other private institutions therefore increasing the prices of the same financial assets while decreasing their yield and increasing the monetary base at the same time. This is different from the typical policies of buying or selling
11 Pages(2750 words)Research Paper
Let us find you another Research Paper on topic Quantitative Easing - Decreasing Interest Rates for FREE!
Contact us:
+16312120006
Contact Us Now
FREE Mobile Apps:
  • About StudentShare
  • Testimonials
  • FAQ
  • Blog
  • Free Essays
  • New Essays
  • Essays
  • The Newest Essay Topics
  • Index samples by all dates
Join us:
Contact Us