Two natural experiments may help shed light on whether quantitative easing, or QE, is an effective monetary policy tool.
Central bankers typically use three theories to justify QE, but none of the theories integrates financial intermediation into the analysis in a serious way.
Many central banks have used quantitative easing, or QE, during and after the global financial crisis.
Central bankers have embraced quantitative easing as an effective, though unconventional, monetary policy tool. But has the promise matched the results?
Cutting interest rates didn’t boost inflation. Will raising them do so, as Irving Fisher suggested in the last century?
Setting the fed funds rate is just one step. The Fed also has to deal with the discount rate and the interest rate paid on reserves. Throw in a floor system (with a subfloor!) and overnight reverse repos, and you’ve got a process that is anything but simple.