Quantitative easing, macroeconomic stability and economic policy effectiveness
Journal of Financial Economic Policy
ISSN: 1757-6385
Article publication date: 29 July 2021
Issue publication date: 24 June 2022
Abstract
Purpose
This study mathematically aims to evaluate the implications of a central bank’s adoption of a policy of quantitative easing (QE)/relative QE.
Design/methodology/approach
It is shown, within an investment-savings (IS)-liquidity preference-money supply (LM) framework, that this policy prerogative has, depending upon the aggressiveness which QE is undertaken, demonstrable implications for the conditions under which macroeconomic stability exists.
Findings
Furthermore, it is shown here that the presence of QE increases the effectiveness of traditional discretionary monetary and fiscal policies.
Originality/value
The study shows, within an IS-LM framework, that this policy prerogative has, depending upon the aggressiveness which QE is undertaken, demonstrable implications for the conditions under which macroeconomic stability exists.
Keywords
Citation
Cebula, R. and Rossi, F. (2022), "Quantitative easing, macroeconomic stability and economic policy effectiveness", Journal of Financial Economic Policy, Vol. 14 No. 4, pp. 468-475. https://doi.org/10.1108/JFEP-06-2021-0149
Publisher
:Emerald Publishing Limited
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