Abstract
The collapse of Lehman Brothers in 2008 opened a new era of monetary policy. The world’s major central banks—the US Federal Reserve Bank (the Fed), the Bank of England (BOE), the European Central Bank (ECB), and the Bank of Japan (BOJ)—embraced the unconventional measure of quantitative easing (QE) to inject an unprecedented scale of liquidity into the financial system. In addition to the more than $5.8 trillion injection from 2007 to the end of 2013,1 the banks cut short-term policy rates to near zero. Their aim was to prevent the endogenous risk generated within the banking system and credit markets from escalating into a global catastrophe.2 Though the goal was achieved, this strategy risked major unintended consequences on an unprecedented scale.3 And it remains to be seen how long it will take for the reversal of QE to normalize the financial conditions affecting credit and how much collateral damage to the real economy will occur. Certainly the transition will profoundly impact businesses and everyone exposed to borrowing, lending and inflation, potentially for decades.
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Notes
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Hoontrakul, P. (2014). Life after QEs. In: Hoontrakul, P., Balding, C., Marwah, R. (eds) The Global Rise of Asian Transformation. Palgrave Macmillan, New York. https://doi.org/10.1057/9781137412362_3
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DOI: https://doi.org/10.1057/9781137412362_3
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