Quantitative easing of monetary policy

Abstract

In 2007-2009, many central banks cut their policy rates sharply in an attempt to stave off deflation, ie a broadly based fall in prices, and to support developments in the real economy. With interest rates falling dose to zero, central banks resorted to non-standard policy measures. These included a long-term commitment to maintaining a low level of interest rates, the expansion of central bank balance sheets by increased provision of central bank money to the economy (quantitative easing) and changes to the structure of the central bank balance sheet, for example by purchasing long-term debt securities and selling short-term ones. This article focuses on exploring the conduct of a policy of quantitative easing and the experiences gained.