QUANTITATIVE EASE AS NON-STANDARD MONETARY POLICY MEASURES

Abstract

Quantitative easing or quantitative easing is a type of non-traditional monetary policy implemented by a nation's central bank. This type of policy involves large purchases of assets to stimulate or stabilize the economy. Quantitative easing is usually implemented after other monetary policy instruments have been used - usually when interest rates are already at the bottom and economic performance is still below the central bank's target. For several decades, central banks in advanced economies have typically used the benchmark interest rate as their tool for conducting monetary policy. In response to the global financial crisis of 2007–2009. Years and the deep recession it caused in parts of the world, central banks in many advanced economies lowered their interest rates to near-zero levels. As economic growth remained weak, interest rates remained at near-zero levels, and some central banks used unconventional monetary policy to stimulate economic activity. These unconventional measures have come to the fore again as central banks around the world respond to the severe economic fallout resulting from the global coronavirus (COVID-19) pandemic. This paper deals with the theoretical aspect of unconventional monetary policy measures and discusses the implications of theoretical models for the effectiveness of asset purchases and looks at evidence from a range of empirical studies.