Since the worldwide financial crisis in 2008, Bank of England (BoE) and other central banks seek to stabilize and stimulate the economy by conventional and non-conventional policies. It seems that one of the non-conventional policies, called quantitative easing (QE), has become the most popular and controversial topic. In March 2009, the bank’s Monetary Policy Committee (MPC) announced that the central banking would purchase the financial asset. They would use the central banking reserves created electronically to achieve this. More specifically, the BoE announced a 50 billion pounds increase in the program of purchasing the asset, to 375 billion pounds totally. However, it was not the first time that central banking used such monetary policy. From 2001 to 2006, the Bank of Japan purchased a great number of public loan and long-term bond to infect the liquidity to the market when the domestic economy was depressed continually and a sharp drop on investment. It seems that QE is an effective way to stimulate the economy and promote the recovery from the financial crisis. However, it may cause the hyperinflation and destroy the whole financial system if it was out of management and supervision. Firstly, this essay will provide a definition of quantitative easing. Further, it will discuss how QE affects the economy and the aims that governments seek to achieve. At last, it will evaluate the advantages and disadvantages of QE as a monetary policy.

First of all, in average time, if the central banks seek to adjust the short-term interest rate, they usually use the monetary policy of open market operation to achieve the goal. Unlike the conventional method, in serve economic crisis, the rates may fall to zero. The governments seek to keep a low level of the long-term rate. In this situation, firms and individuals are more likely to spend their money rather than save it,