The lessons from QE and other 'unconventional' monetary policies - evidence from the Bank of England
- This paper investigates the effectiveness of the ‘quantitative easing’ policy, as implemented by the Bank of England in March 2009. Similar policies had been previously implemented in Japan, the U.S. and the Eurozone. The effectiveness is measured by the impact of Bank of England policies (including, but not limited to QE) on nominal GDP growth – the declared goal of the policy, according to the Bank of England. Unlike the majority of the literature on the topic, the general-to-specific econometric modeling methodology (a.k.a. the ‘Hendry’ or ‘LSE’ methodology) is employed for this purpose. The empirical analysis indicates that QE as defined and announced in March 2009 had no apparent effect on the UK economy. Meanwhile, it is found that a policy of ‘quantitative easing’ defined in the original sense of the term (Werner, 1994) is supported by empirical evidence: a stable relationship between a lending aggregate (disaggregated M4 lending, i.e. bank credit for GDP transactions) and nominal GDP is found. The findings imply that BoE policy should more directly target the growth of bank credit for GDP-transactions.
Author: | Victor Lyonnet, Richard A. Werner |
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URN: | urn:nbn:de:hebis:30:3-241110 |
Parent Title (German): | Center for Financial Studies (Frankfurt am Main): CFS working paper series ; No. 2011,29 |
Series (Serial Number): | CFS working paper series (2011, 29) |
Publisher: | Goethe-Univ., House of Finance, Center for Financial Studies |
Place of publication: | Frankfurt am Main |
Document Type: | Working Paper |
Language: | English |
Year of Completion: | 2011 |
Year of first Publication: | 2011 |
Publishing Institution: | Universitätsbibliothek Johann Christian Senckenberg |
Release Date: | 2012/02/07 |
Tag: | Central Banking; General-to-specific Methodology; Monetary Policy; Nominal GDP Growth; Quantitative Easing |
Issue: | Version June 29, 2011 |
Page Number: | 46 |
HeBIS-PPN: | 312197330 |
Institutes: | Wissenschaftliche Zentren und koordinierte Programme / House of Finance (HoF) |
Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS) | |
Licence (German): | Deutsches Urheberrecht |