...------------------------------------------------- Quantitative Easing ------------------------------------------------- Table of Contents Quantitative Easing in general: 2 How the USA Federal Reserve has put QE in practice. 3 QE plan recently approved by the European Central Bank. 4 Likely effects of QE in the Euro Area in relation to the aggregate supply/aggregate demand model and the loanable funds theory 5 Discuss the effects the QE can have on exchange rates. 6 Abstract This paper presents an overview of the policy of Quantitative Easing, used by central banks in an effort to revive the economic system and interrupt a period of economic recession. Quantitative Easing in general In the instance of a crisis such as the one of 2008, Central Banks put monetary and fiscal policies in practice in order to limit the damage to firms and households an maintain a healthy economic environment. The most used and widespread policy used by Central Banks acts upon the interest rates. Lowering interest rates, for example, makes it more convenient for individuals and firms to increase investments rather than save, thereby increasing spending. An increase in investments and spending within the system should, in theory, take the economy out of a recession. However, once the interest rate reaches zero (zero bound ratio) without obtaining any results, CBs must adopt other policies. One of these is the policy of Quantitative Easing; it consists in CBs providing liquidity to...
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...QUANTITATIVE EASING: A RATIONALE AND SOME EVIDENCE FROM JAPAN This paper was prepared for the NBER International Seminar on Macroeconomics 2009. Volker Wieland thanks the European Central Bank for support as Duisenberg Research Fellow while the initial presentation for the ISOM conference in June 2009 in Cyprus was prepared. The help of Alberto Musso from the European Central Bank in collecting data on Japan is gratefully acknowledged. Helpful comments by conference participants, and in particular by Huw Pill, Vincent Reinhart, Frank Smets, Christian Thimann and Athanasios Orphanides were highly appreciated. The usual disclaimer applies. The views expressed herein are those of the author(s) and do not necessarily reflect the views of the National Bureau of Economic Research. NBER working papers are circulated for discussion and comment purposes. They have not been peerreviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications. © 2009 by Volker Wieland. All rights reserved. Short sections of text, not to exceed two paragraphs, may be quoted without explicit permission provided that full credit, including © notice, is given to the source. Quantitative Easing: A Rationale and Some Evidence from Japan Volker Wieland NBER Working Paper No. 15565 December 2009 JEL No. E31,E52,E58,E61 ABSTRACT This paper reviews the rationale for quantitative easing when central bank policy rates reach near zero levels in light of recent...
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...|ELECTRONIC ASSIGNMENT COVERSHEET |[pic] | |Student Number |32477916 | |Surname |Helliwell | |Given name |James Maxwell | |Email |Jhel8204@uni.sydney.edu.au | | | | |Unit Code |BUS290 | |Unit name |International Financial Markets and Institutions | |Enrolment mode |External | |Date |10/4/2014 | |Assignment number |1 ...
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...Abstract Evaluation of the Quantitative Easing (QE) stimulus package was reviewed within the framework of this research. The financial crisis that resulted after the collapse of the auto industry along with the savings and loans scandals has given rise to QE. QE can be defined as an attempt to subdue interest rates which in turn encourages spending and stimulates the economy. The U.S. is currently on round three of the QE program. Research of QE seemed important as it has been extended three times. This research attempted to answer what the role of QE is in our economy and what the effects are on our business sector. Also, whether or not this stimulus is actually helping the U.S. was called into question. The preliminary data did not support that QE was actually helping as the results have been very slow or non-existent. Whether it is or is not helping may not be seen for years to come. The role of QE to stimulate the economy has been very slow as well and the results on the business sector have only increased the price of gasoline as well as other commodities. The increased costs have been passed on to the consumer which has not aided in stimulation of the economy. Overall, QE has not afforded many benefits and has done nothing more than subdue interest rates, slow the decline in Gross Domestic Profit (GDP), increase transportation costs, and devalue the U.S. dollar. Table of Contents Introduction………………………………………………………………………………………..4 Literature...
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...Quantitative Easing: Entrance and Exit Strategies by Alan S. Blinder, Princeton University CEPS Working Paper No. 204 March 2010 Acknowledgements: Paper prepared for the Homer Jones Memorial Lecture at the Federal Reserve Bank of St. Louis, April 1, 2010. I am grateful to Gauti Eggertsson, Todd Keister, Jamie McAndrews, Paul Mizen, John Taylor, Alexander Wolman, and Michael Woodford for extremely useful comments on an earlier draft, and to Princeton’s Center for Economic Policy Studies for research support. Apparently, it can happen here. On December 16, 2008, the Federal Open Market Committee (FOMC), in an effort to fight what was shaping up to be the worst recession since 1937, reduced the federal funds rate to nearly zero. 1 From then on, with all of its conventional ammunition spent, the Federal Reserve was squarely in the brave new world of quantitative easing. Chairman Ben Bernanke tried to call the Fed’s new policies “credit easing,” probably to differentiate them from what the Bank of Japan had done earlier in the decade, but the label did not stick. 2 Roughly speaking, quantitative easing refers to changes in the composition and/or size of the central bank’s balance sheet that are designed to ease liquidity and/or credit conditions. Presumably, reversing these policies constitutes “quantitative tightening,” but nobody seems to use that terminology. The discussion refers instead to the “exit strategy,” indicating that quantitative easing (“QE”) is looked upon as...
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...end of the 20th Century, Japan was officially recognized as an economic superpower throughout the world. However, growth never lasts forever and by the 1990s, Japan’s economy had come to a grinding halt due to a massive collapse in both the real estate and stock markets of the Japanese economy and remains in a recession that has lasted till now. As Japan looked to face another year of stagnant growth of the economy, Japan’s Prime Minister, Shinzo Abe, decided enough was enough. With the assistance of the new governor of the Bank of Japan, Shinzo Abe embarked on a radical economic plan that focused on three arrows of design. The arrows depict the strategy of Shinzo Abe’s “Abenomics” program in which it focuses on fiscal stimulus, monetary easing, and structural reforms. (International Monetary Fund 2013) It is almost near the two year mark since the implementation of Shinzo Abe’s “Abenomics” program has begun. Although typically, economic effects of governmental policies require years to fully see the effects, “Abenomics” was designed as a jumpstart program with future decisions dependent on the immediate aftereffects of implementation. With the initial completion of the first two arrows of the “Abenomics” economic program and the implementation of the third arrow of structural reforms of the Japanese economy, labor, and tax...
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...The Rise (and Fall) of the Japanese Yen Lawrence Cifarelli III, Nazanin Ershad, Natthima Sonsoem, Anyesha Mahaptra University of New Haven Abstract This Case study provides an insight to the fluctuations experienced in the currency of Japan, Yen from the late 1990’s to recent years. Japan follows the floating currency monetary policy due to which there is no measures taken on to control the fluctuations. Japan experienced magnificent growth through the 60's, 70's, and 80's leading into the 90's beginning. In the late 1990's, Japan’s economy marked its growth significantly slower, which had then come to be known as the 'lost decade' due to Japanese Asset Price bubble that collapsed. Eventually the nation faced major issues regarding environmental disasters, hollowing out of industries, etc. The past events which have caused the rise and downfall of Japanese Yen has been illustrated for examining the causes of the appreciation and depreciation of this currency. The influence of this floating currency on Japan's economy has been depicted in this case study. This paper also provides some applications of the measures that can maintain the stability of the Japanese Yen. Japan experienced tremendous growth throughout the 1960s, 1970s, and 1980s leading into the leading into the early 1990s. After World War II, Japan underwent a period of restoration followed by the events in 1978 where Japan excelled as a manufacturer partnering with the United States which helped to make its...
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...NBER WORKING PAPER SERIES TWO DECADES OF JAPANESE MONETARY POLICY AND THE DEFLATION PROBLEM Takatoshi Ito Frederic S. Mishkin Working Paper 10878 http://www.nber.org/papers/w10878 NATIONAL BUREAU OF ECONOMIC RESEARCH 1050 Massachusetts Avenue Cambridge, MA 02138 October 2004 This paper is written for the NBER 15th East Asian Seminar on Economics, June 25-27, 2004. The authors are grateful to Takeshi Kudo and Emilia Simeonova for their excellent research assistance. We also thank our discussants Ken Kuttner, and Kazuo Ueda, Kunio Okina and participants at seminars at the Bank of Japan, and the East Asian Seminar on Economics. Any views expressed in this paper are the views of the authors only and not the University of Tokyo, Columbia University or the National Bureau of Economic Research. The views expressed herein are those of the author(s) and not necessarily those of the National Bureau of Economic Research. © 2004 by Takatoshi Ito and Frederic S. Mishkin. All rights reserved. Short sections of text, not to exceed two paragraphs, may be quoted without explicit permission provided that full credit, including © notice, is given to the source. Two Decades of Japanese Monetary Policy and the Deflation Problem Takatoshi Ito and Frederic S. Mishkin NBER Working Paper No. 10878 October 2004 JEL No. E42, E52, E58 ABSTRACT This paper reviews Japanese monetary policy over the last two decades with an emphasis on the experience of deflation from the mid-1990s. The paper is quite...
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...ABSTRACT “QE 2” – Was it necessary to stimulate economic growth or is it sowing the seeds for undesirable levels of inflation in the years ahead? How would your view impact your investment strategy? | Kunal MishraRutgers Business School | Introduction to Quantitative Easing (QE): Quantitative easing (QE) is an unconventional monetary policy tool used by some central banks to stimulate the national economy when conventional monetary policy has become ineffective. In the late 2008 Federal Reserve pursued this unconventional policy of purchasing large quantities of long-term securities, including Treasuries, Agency bonds, and Agency Mortgage Backed Securities. The stated objective of quantitative easing is to reduce long-term interest rates in order to spur economic activity. A central bank implements quantitative easing by purchasing financial assets from banks and other private sector businesses with new money that is created electronically. This action increases the excess reserves of the banks, and also raises the prices of the financial assets bought, which further lowers their yield. The recent quantitative easing policy targeted at credit easing in the business and household sector, so that the increase in reserves is a by-product rather than an objective of monetary policy. As a part of its expansionary monetary policy the Fed has maintained a lower short-term market interest rate through the buying of short-term government bonds, using a combination of lending facilities...
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...The International Bond Market Impact of Unconventional Monetary Policy Yu Zhang 130023326 University of Dundee College of Arts and Social Sciences School of Business April 2014 Content Abstract ................................................................................................................................................... 2 Chapter 1 Introduction .......................................................................................................................... 3 Chapter 2 Literature review.................................................................................................................. 6 Chapter 3 Data and Methodology....................................................................................................... 10 3.1 Data.............................................................................................................................................. 10 3.2 Methodology ............................................................................................................................... 10 Chapter 4 Four Central Banks’ Unconventional Monetary Policy Announcements Details ........ 13 4.1 Important Announcements........................................................................................................ 13 Table 1 Important announcements by the Federal Reserve ............................................................ 13 4.2 Quick Summary: .....................................................
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...Case Study Why the telecoms industry is doing business in RMB Telecoms equipment and handset manufacturers like Telco – the representative but fictional example in this case study – recognise that they can only stand out in a tough sector by competing on an international scale. This increasingly means doing business in high-growth emerging markets like China and leveraging RMB to gain that vital competitive advantage. Background Telco, with its Head office based in London, began life as a manufacturer of wire-line equipment for the Western European aerospace sector. Following the privatisation of national telecoms operators from the late 1980s, it refocused its business to supply carriers in Europe and the US. Telco has been an HSBC client for more than ten years, after finding that domestic banks could not match its international expansion strategy. HSBC’s global network supported its exports growth across new markets by supporting all Telco’s export invoices. Rolling waves of telecoms deregulation saw Telco and other suppliers enter the mobile handset market in the 1990s, attracted by the significant growth opportunities. The intense competition and tightening margins in equipment supply – not least the demand from emerging markets – saw Telco make its first trip to China on a sourcing mission for basic components. Building a business In China At the company’s request, HSBC relationship managers helped guide Telco’s entry into China by working with professional advisors...
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...Threat of fiscal dominance? A BIS/OECD workshop on policy interactions between fiscal policy, monetary policy and government debt management after the financial crisis Basel, 2 December 2011 Monetary and Economic Department May 2012 Papers in this volume were prepared for the joint BIS and OECD workshop on “Policy interaction: fiscal policy, monetary policy and government debt management”, held in Basel on 2 December 2011. The views expressed are those of the authors and do not necessarily reflect the views of the BIS or the central banks represented at the meeting. Individual papers (or excerpts thereof) may be reproduced or translated with the authorisation of the authors concerned. This publication is available on the BIS website (www.bis.org). © Bank for International Settlements 2012. All rights reserved. Brief excerpts may be reproduced or translated provided the source is stated. ISSN 1609-0381 (print) ISBN 92-9131-135-9 (print) ISSN 1682 7651 (online) ISBN 92-9197-135-9 (online) Preface The massive expansion of central bank balance sheets to contain the worst financial crisis in living memory raises questions about the theory and practice of monetary policy. The persistence in many advanced countries of large fiscal deficits and the prospect of high public debt/GDP ratios for many years is likely, at some point, to create policy dilemmas not only for central banks but also for public debt managers. Some countries have already had to cope with higher...
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...Would manual monitoring of blood pressure be more accurate than machinery monitoring in adult medical patients for detecting variations in blood pressure? Introduction Today’s health care applies evidence based practice in patient care with the purpose of easing the clinical decision making with standard practice and provide high quality care to patients. Evidence Based Practice is a problem solving method in clinical care on the basis of best available findings from patient preferences, clinical expertise and sound evidences. EBP provides best clinical decision making and better outcomes to patients, than normally designed research studies. The intention of this activity is to identify evidences for answering the research question of would manual monitoring of blood pressure be more accurate than machinery monitoring in adult medical patients for detecting variations in blood pressure? The collection of relevant information suggests that the use of manual monitoring of blood pressure helps to provide the ability to the health practitioners to offer the patient care with evidence support. It is imperative to monitor the blood pressure in every clinical setting to assess the physical condition and it is of vital importance to consider the measurements in clinical decision making (Bern et al. 2009). As shown by Heinemann et al (2008), the accuracy and the reliability of the method adopted for monitoring the blood pressure preclude the possibility of unnecessary complication...
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...Williamson This article is a reflection on monetary policy in the United States during Ben Bernanke’s two terms as Chairman of the Federal Open Market Committee, from 2006 to 2014. Inflation targeting, policy during the financial crisis, and post-crisis monetary policy (forward guidance and quantitative easing) are discussed and evaluated. (JEL E52, N12) Federal Reserve Bank of St. Louis Review, Second Quarter 2014, 96(2), pp. 111-21. en Bernanke chaired his last Federal Open Market Committee (FOMC) meeting in January 2014 and departed from the Board of Governors on February 3 after eight years as the head of the Federal Reserve System. So, the time is right to look back on the Bernanke era and ask how central banking has and has not changed since 2006. There is plenty in the macroeconomic record from 2006 to 2014 to keep economists and policy analysts busy for many years, so in this short piece we can only scratch the surface of what is interesting about the Bernanke era. I will focus on three issues: (i) inflation targeting, (ii) Fed lending and other interventions during the financial crisis, and (iii) post-crisis Fed policy, in particular experiments with forward guidance and quantitative easing (QE). B INFLATION TARGETING When Bernanke began his first term in 2006, I think the big change people expected was an inflation-targeting regime for U.S. monetary policy, similar to what exists in New Zealand, Canada, and the United Kingdom, for example. While that may have been...
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...the federal funds target was reduced from 5.25% to a range of 0% to 0.25% on December 16, 2008, where it has remained since. With the federal funds target at this zero lower bound, the Fed attempted to provide additional stimulus through unconventional policies. It provided forward guidance on its expectations for future rates, announcing that it “anticipates that, even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run.” The Fed also added monetary stimulus through unsterilized purchases of Treasury and mortgage-backed securities (MBS), a practice popularly referred to as quantitative easing (QE). Between 2009 and 2014, the Fed undertook three rounds of QE. The third...
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