Quantitative Easing: Economic & Financial Effects of an Unconventional Monetary Policy

Katla Ásgeirsdóttir

Student thesis: Master thesis


The purpose of this thesis is to analyze the implementation of the unconventional monetary policy of quantitative easing that was enforced following the 2008 global financial crisis, and discuss the financial and economic effects it has had on the implementing countries. The focus will be on four large central banks’ measures: the Bank of Japan, the European Central Bank, the Bank of England, and the Federal Reserve. A special emphasis will be on the Federal Reserve’s implementation of the policy in the United States. The future of the policy is a secondary analysis that focuses solely on its future within the Federal Reserve. The analysis is primarily a practical analysis based on information in the form of articles gathered mainly from the central banks themselves. A short theoretical analysis is included that attempts to define and categorize the policy, which is a challenge given its nature as an unconventional policy and therefore it avoids conventional definition. The main findings are that the implementation of quantitative easing has been extensive in the four central banks’ economies and the effects have been comprehensive and generally positive. The Federal Reserve has had the largest implementation so far, the US monetary base has expanded to $4.096 trillion as of August 2014, and the effects have been substantial. Financial market activity, GDP growth, and inflation have all been positively affected by the immense amount of liquidity increases that has stimulated market participation and economic reform. As for the future of the policy, economists speculate that the time will soon come for an exit, and an optimal exit strategy sees the Federal Reserve begin by ceasing purchases of long-term Treasury bonds followed by a cessation of MBSs purchases.

EducationsMSc in Finance and Strategic Management, (Graduate Programme) Final Thesis
Publication date2014
Number of pages102