Is quantitative easing long run beneficial to an economy?
Understand the Problem
The question is asking whether quantitative easing, a monetary policy used to stimulate the economy by increasing money supply, has long-term benefits for an economy. This involves evaluating economic theories and empirical evidence related to the impacts of such policies over an extended period.
Answer
QE has benefits like lowering borrowing costs, but its long-term economic effects are uncertain.
Quantitative easing (QE) has both benefits and drawbacks in the long run. It lowers long-term borrowing costs to support spending and hit inflation targets. However, its broader impact on long-term economic growth and stability is uncertain and can side-track central bank independence.
Answer for screen readers
Quantitative easing (QE) has both benefits and drawbacks in the long run. It lowers long-term borrowing costs to support spending and hit inflation targets. However, its broader impact on long-term economic growth and stability is uncertain and can side-track central bank independence.
More Information
Quantitative easing can help bring an economy out of recession and maintain targeted inflation levels. However, the long-term impacts include potential negative effects such as the withdrawal of safe collateral from markets and questions over central bank independence.
Tips
A common mistake is assuming QE will always lead to positive economic outcomes, while it may also cause asset bubbles or inequality.
Sources
- Quantitative Easing (QE): What It Is and How It Works - Investopedia - investopedia.com
- What Is Quantitative Easing? How Does QE Work? - Forbes - forbes.com
- Quantitative Easing: Considering Its Benefits and Drawbacks - sites.lsa.umich.edu
