Quantitative easing, macroeconomic stability and economic policy effectiveness

Richard Cebula () and Fabrizio Rossi

Journal of Financial Economic Policy, 2021, vol. 14, issue 4, 468-475

Abstract: Purpose - This study mathematically aims to evaluate the implications of a central bank’s adoption of a policy of quantitative easing (QE)/relative QE. Design/methodology/approach - It is shown, within an investment-savings (IS)-liquidity preference-money supply (LM) framework, that this policy prerogative has, depending upon the aggressiveness which QE is undertaken, demonstrable implications for the conditions under which macroeconomic stability exists. Findings - Furthermore, it is shown here that the presence of QE increases the effectiveness of traditional discretionary monetary and fiscal policies. Originality/value - The study shows, within an IS-LM framework, that this policy prerogative has, depending upon the aggressiveness which QE is undertaken, demonstrable implications for the conditions under which macroeconomic stability exists.

Keywords: Monetary policy; Monetary systems (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:eme:jfeppp:jfep-06-2021-0149

DOI: 10.1108/JFEP-06-2021-0149

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