An Unconventional Approach to Evaluate the Bank of England’s Asset Purchase Program


Empirical papers analysing the transmission of (unconventional) monetary policy typically rely on a vector autoregressive framework. In this paper, I complement these studies and employ a matching approach to examine the impact of the Bank of England’s asset purchase program on macroeconomic quantities in the UK. My sample covers the period March 2001−December 2015 and five small open inflation targeting economies. Using entropy balancing, I create a synthetic control group comprised of credible counterfactuals for the sample of observations subject to quantitative easing (QE). My key results indicate that a 100 bn GBP increase in QE has a significant and positive effect on GDP growth with a peak effect of 0.66−0.69 percentage points (pp) after 30 months. The same increase leads to a reduction in the inflation gap with a peak effect between −0.77 and −0.94 pp after 30 months. An in-depth analysis reveals that the latter finding is not driven by the choice of the empirical methodology. In contrast, I find that the returns on QE in the UK are decreasing (i) over time and (ii) with the volume of QE. Consequently, monetary policymakers should be aware of the fact that the returns on QE might be non-linear and that QE eventually could have detrimental effects.

This is a preview of subscription content, access via your institution.

Fig. 1


  1. 1.

    See also the top left panel of Fig. 2 in the Appendix. Section 2 provides more background on QE in the UK and other economies.

  2. 2.

    The financial market impact of QE in the UK is documented, inter alia, by Breedon et al. (2012), Christensen and Rudebusch (2012), Joyce et al. (2011a), and Meaning and Zhu (2011).

  3. 3.

    Note that the inclusion of further macroeconomic variables is not feasible as this would violate the condition of perfect covariate balancing.

  4. 4.

    Note that the difference in GDP growth between treated and non-treated units is not statistically significant when focusing on the financial crisis subsample.

  5. 5.

    Note that applying the same exercises in the case of the treatment effects on GDP growth does neither reveal a clear pattern over time nor a distinct non-linearity. The results are available on request.


  1. Angrist JD, Jorda O, Kuersteiner GM (2018) Semiparametric estimates of monetary policy effects: String theory revisited. J Bus Econ Stat 36(3):371–387

    Article  Google Scholar 

  2. Bauer MD, Rudebusch GD (2014) The signaling channel for federal reserve bond purchases. Int J Cent Bank 10(3):233–289

    Google Scholar 

  3. Baumeister C, Benati L (2013) Unconventional monetary policy and the great recession: Estimating the macroeconomic effects of a spread compression at the zero lower bound. Int J Cent Bank 9(2):165–212

    Google Scholar 

  4. Breedon F, Chadha JS, Waters A (2012) The financial market impact of UK quantitative easing. Oxf Rev Econ Policy 28(4):702–728

    Article  Google Scholar 

  5. Christensen JHE, Rudebusch GD (2012) The response of interest rates to US and UK quantitative easing. Econ J 122(564):F385–F414

    Article  Google Scholar 

  6. Cloyne J, Hürtgen P (2016) The macroeconomic effects of monetary policy: a new measure for the United Kingdom. American Econ J: Macroeconomics 8(4):75–102

    Google Scholar 

  7. Diamond A, Sekhon JS (2013) Genetic matching for estimating causal effects: A general multivariate matching method for achieving balance in observational studies. Rev Econ Stat 95(3):932–945

    Article  Google Scholar 

  8. Gambacorta L, Hofmann B, Peersman G (2014) The effectiveness of unconventional monetary policy at the zero lower bound: A cross-country analysis. J Money, Credit, Bank 46(4):615–642

    Article  Google Scholar 

  9. Goodhart CAE, Ashworth JP (2012) QE: A successful start may be running into diminishing returns. Oxf Rev Econ Policy 28(4):640–670

    Article  Google Scholar 

  10. Hainmueller J (2012) Entropy balancing for causal effects: A multivariate re-weighting method to produce balanced samples in observational studies. Polit Anal 20(1):25–46

    Article  Google Scholar 

  11. Joyce MAS, Lasaosa A, Stevens I, Tong M (2011a) The financial market impact of quantitative easing in the United Kingdom. Int J Cent Bank 7(3):113–161

    Google Scholar 

  12. Joyce M, Tong M, Woods R (2011b) The United Kingdom’s quantitative easing policy: Design, operation, and impact. Bank of England Quarterly Bulletin 2011Q3, 200–212

  13. Joyce M, Miles D, Scott A, Vayanos D (2012) Quantitative easing and unconventional monetary policy – an introduction. Econ J 122(564):F271–F288

    Article  Google Scholar 

  14. Kapetanios G, Mumtaz H, Stevens I, Theodoridis K (2012) Assessing the economy-wide effects of quantitative easing. Econ J 122(564):F316–F347

    Article  Google Scholar 

  15. Lin S, Ye H (2007) Does inflation targeting really make a difference? evaluating the treatment effect of inflation targeting in seven industrial countries. J Monet Econ 54(8):2521–2533

    Article  Google Scholar 

  16. Meaning J, Zhu F (2011) The impact of recent central bank asset purchase programmes. BIS Quarterly Review December 2011:73–83

    Google Scholar 

  17. Martin C, Milas C (2012) Quantitative easing: A sceptical survey. Oxf Rev Econ Policy 28(4):750–764

    Article  Google Scholar 

  18. Neuenkirch M, Tillmann P (2016) Does a good central banker make a difference? Econ Inq 54(3):1541–1560

    Article  Google Scholar 

  19. Romer CD, Romer DH (2004) A new measure of monetary shocks: Derivation and implications. Am Econ Rev 94(4):1055–1084

    Article  Google Scholar 

  20. Sims CA (1980) Macroeconomics and reality. Econometrica 48(1):1–48

    Article  Google Scholar 

  21. Uhlig H (2005) What are the effects of monetary policy on output? results from an agnostic identification procedure. J Monet Econ 52(2):381–419

    Article  Google Scholar 

  22. Weale M, Wieladek T (2016) What are the macroeconomic effects of asset purchases? J Monet Econ 79:81–93

    Article  Google Scholar 

  23. Williamson SD (2017) Quantitative easing: How well does this tool work? J Regul Econ 2017Q3:8–14

    Google Scholar 

  24. Wu JC, Xia FD (2016) Measuring the macroeconomic impact of monetary policy at the zero lower bound. J Money, Credit, Bank 48(2–3):253–291

    Article  Google Scholar 

Download references


I wish to thank Yesmine Arousse for excellent research assistance. I am also indebted to two anonymous referees, Tobias Kranz, Florian Neumeier, Peter Tillmann, Arina Wischnewsky, and participants of the Money, Macro and Finance Group 49th Annual Conference in London for their helpful comments on earlier versions of the paper. Financial support from the Deutsche Bundesbank, Hauptverwaltung in Rheinland-Pfalz und dem Saarland is gratefully acknowledged.

Author information



Corresponding author

Correspondence to Matthias Neuenkirch.

Additional information

Publisher’s Note

Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.



Fig. 2

Macroeconomic Data. Source: Bank of England (asset purchases), OECD (interest rates, GDP growth, unemployment rate, and inflation rate), and BIS (credit growth). Vertical lines refer to March 2009

Rights and permissions

Reprints and Permissions

About this article

Verify currency and authenticity via CrossMark

Cite this article

Neuenkirch, M. An Unconventional Approach to Evaluate the Bank of England’s Asset Purchase Program. Open Econ Rev 31, 79–94 (2020).

Download citation


  • Asset purchases
  • Bank of England
  • Entropy balancing
  • Matching
  • Quantitative easing
  • Treatment effects
  • Unconventional monetary policy

JEL Classification

  • E52
  • E58