The Effectiveness of Quantitative Easing: Evidence from Case Study

Abstract

This review paper outlines, analyzes and evaluates QE programs implemented by US, UK, and Japan in response to the global financial crisis. By time-lining the critical actions taken by the Federal Reserve, Bank of England and Bank of Japan, the paper describes and compares the motivations and circumstances of each case. The aim of quantitative easing programs is to ease financial conditions by increasing liquidity to drive up economic growth and maintain target inflation rate. Whilst all three countries have conducted several rounds of QE in order to meet the macro-objectives of steady and stable economic growth and inflation around 2%, US and UK inserted a strong focus on expanding the central bank balance sheet by heavily purchasing assets, with particularly the US purchasing the greatest value. Japan, on the other hand, emphasized the increase in lending. BoJ has also been conducting QE, but in a long-term fashion and of a broader purpose, due to the nature of the Japanese population being aging.