Concepts
Quantitative Easing
Also Known As QE
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A monetary policy tool in which a central bank creates new reserves to buy large quantities of government bonds and other financial assets, aiming to push down long-term interest rates and increase the money supply once conventional short-term rate cuts reach zero. Major central banks used it at unprecedented scale after the 2008 financial crisis and again during the COVID-19 pandemic; economists disagree on how much of its effect works through the money supply itself, in the monetarist tradition, versus through signalling and portfolio-rebalancing channels favored in Keynesian accounts.
Facts
FieldMonetary Economics, Macroeconomics 1 Proposed ByNames the institution that first used the policy under this name, not an individual economist. Origin YearThe Bank of Japan formally adopted the policy on 19 March 2001. SignificanceMajor central banks used QE at unprecedented scale after the 2008 financial crisis and again during the COVID-19 pandemic; the Bank of Japan's own original program increased commercial bank current account balances roughly sevenfold, from 5 trillion to 35 trillion yen, over its first four years. 2 Cross-Tradition Connections
Associated With
QE was deployed at unprecedented scale by major central banks as a response to the 2008 crisis once policy rates hit zero.
The Bank of Japan ran the first sustained modern quantitative easing program, 2001-2006, predating the Federal Reserve's and European Central Bank's adoption of the tool during the 2008 financial crisis.
Critiqued Here
Why this is disputed. Austrians read large-scale money creation as distorting relative prices and interest rates rather than safely expanding demand.
Associated With School
Keynesians generally support unconventional monetary expansion as a demand-support tool when policy rates are near zero.
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