What are the macroeconomic effects of asset purchases?
Martin Weale, Tomasz Wieladek 10 June 2014
After reducing their policy rates close to zero in response to the global financial crisis, the Bank of England and the Federal Reserve began purchasing assets. This column assesses the effect of these asset purchases on output and inflation. In line with previous studies, the authors find that asset purchase announcements are associated with increases in both output and inflation in both countries. They also find that quantitative easing had a larger impact on UK inflation, which suggests that the UK Phillips curve is steeper.
After policy rates fell close to zero in response to the global financial crisis of 2008-09, the scope for further conventional monetary policy easing was exhausted. As a result, both the Bank of England and the Federal Reserve embarked on large-scale asset purchases of government and financial securities (see Figures 1 and 2).
inflation, Federal Reserve, Phillips curve, Bank of England, quantitative easing, unconventional monetary policy, output
Jobs and growth are still linked (that is, Okun’s Law still holds)
Laurence Ball, Daniel Leigh, Prakash Loungani 26 January 2013
Will recovery be jobless? A broad array of analysts, from Vox columnists to McKinsey, are arguing that Okun’s Law is broken. This column presents new research suggesting that, in fact, Okun is alive and well. When output recovers, the jobs will come back, although employment will differ across countries. There may be good reasons for the structural reforms that many propose as a way to boost job creation, but undertaking them in the belief that Okun’s Law has broken down should not be one of them.
Unemployment rates remain high in most advanced countries. Many scholars have drawn attention to an apparent decoupling of unemployment increases from output declines during the Great Recession (e.g. IMF 2010, Cazes et al. 2011).
Global crisis Labour markets
unemployment, jobless recovery, Okun, output