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 - Essay Example

Comments (0)
Summary
Quantitative easing is a monetary policy that is employed by central banks in order to boost the national economy when the traditional monetary policy has been employed to no avail. The aim is to boost the economy by injecting a specific quantity of money into the economy…
Download full paper
GRAB THE BEST PAPER
Quantitative Easing
Read TextPreview

Extract of sample
Quantitative Easing

Download file to see previous pages... This act expands the excess reserves of banks and lowers the yield since the prices of the financial assets rise (Wieland & Research., 2009).
Since this is a type of a monetary policy, it also includes expansionary and contractionary monetary policies. Expansionary policies include those in which the central bank purchases government bonds (short-term) in order to bring down the market interest rate. When interest rates are at zero and traditional monetary policy cannot be brought into play, quantitative easing is used to further boost the economy, and not only are short-term bonds purchased, but long-term bonds are purchased as well, and the yield would be most likely to increase. (Economist, 2005)
This policy helps to keep inflation at the right percentage, neither too low nor too high. However, easing can become over-effective and result in deflation or be ineffective and lead to banks not lending out additional reserves (Economist, 2005).
As aforementioned, the central bank imposes a monetary policy by a rise or fall in the interest rate. Then the interest rate target is also achieved by open market operations, which essentially involves the buying or selling of short-term government bonds from financial institutions including banks. The process involves the central bank lending out bonds, collecting the money from these bonds purchased, and this in turn changes the money supply in the economy and at the same time affects the price of government bonds, even though just the short-term ones. This entire process changes the interbank rates of interest (Fukasawa & Corporation, 2000).
A liquidity trap occurs when the central bank cannot change the interest rate. Quantitative easing is then used to boost the economy without referring to the interest rate. The aim of quantitative easing is to affect the money supply and not the interest rate, which is impossible to reduce in any case. And this is referred to as a “last resort policy” in ...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
Quantitative Easing
Quantitative Easing Name Course Professor Date Quantitative Easing Introduction; Quantitative easing is an unusual financial tool used by central banks to arouse the economy. This is when there is a depression or the nation is limping along. The central bank set aside will decrease short-term interest rates in order to stimulate lending and expenditure.
8 Pages(2000 words)Essay
Quantitative Easing - Decreasing Interest Rates
The US economy floods the market with money as a measure to overcome the impacts of the 2000 global financial crisis and subsequent bank collapses. From the viewpoint of Kollewe (2009), it is identified that this monetary policy does not really benefit the Fed even though this approach may bring notable achievements in the short term.
6 Pages(1500 words)Research Paper
Quantitative Easing
Name Institution Course Instructor Date Quantitative Easing Stimulating the economy of a country requires unconventional measures that involve monetary policies such as quantitative easing. In such a case, a country’s central bank purchases financial assets from banks and any other private sector business with new electronically created money in order to inject a pre-determined amount of money in the economy of the country (Mayer, 2010:266).
6 Pages(1500 words)Essay
Macroeconomics - Quantitative Easing
This is facilitated by the private sector and banks by means of electronic money. The liquidity and funding in the money market increases by a growth in the money supply due to a rise in capital in banks and other financial institutions (Wieland, 2009). Quantitative easing is divided into expansionary and contractionary policies as well.
5 Pages(1250 words)Essay
Explain how the Bank of England tries to manage inflation and discuss whether the Quantitative Easing Programme may cause higher
The financial crisis has made the economy face several challenges and the Bank plans to overcome those challenges by using the quantitative ease methods to ensure free flow of the money (Ahmad, 2010). Same has hit the Bank of England as the increasing financial crisis has resulted in the increase of inflation.
7 Pages(1750 words)Essay
Quantitative easing and inflation
In most of the times when a country suffers from inflation the central bank of that country takes several steps to stop severe inflation and tries to minimise the prices of the goods and services (Hudson, 1982, p.67). The central bank of United Kingdom is known as “The Bank of England”.
8 Pages(2000 words)Essay
Quantitative Easing (Pros and Cons)
Most governments feel that asset purchases provide additional stimulus to nominal spending and this is the important aspect in reducing the level of inflation in a country. While this may be true, economist is still skeptical on the effects of such a move on asset prices, the expectation of the public and the availability of credit for a stable economy.
5 Pages(1250 words)Essay
Write a proposal for relax quantitative easing monetary policy
When the interest rates are at or close to zero bound situation, the policy can no longer be executed but instead the central bank
4 Pages(1000 words)Essay
Evaluate the potential effectiveness of ECB's monetary policy decision on the recent quantitative easing programme within the Rurozone economy
The monetary finance is a policy set in place to see the supply of money in the market does not exceed its demand (Senn, 1999). This is only achievable through setting of interest charges on loans offered. When you increase the charges at which loans are offered,
3 Pages(750 words)Essay
About the role of Quantitative Easing in helping the UK out of the slum
In taking these actions, the BOE assumes that rational and self-interested actors will behave in predictable ways, borrowing money when rates are low and deferring purchases when rates are
7 Pages(1750 words)Essay
Let us find you another Essay on topic Quantitative Easing 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