Effects of Quantitative Easing on Economic Sentiment: Evidence from Three Large Economies

Benjamin Baker () and Murat Üngör
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Benjamin Baker: Bank of England

Comparative Economic Studies, 2025, vol. 67, issue 1, No 2, 50-83

Abstract: Abstract We analyze the impact of quantitative easing (QE) on economic sentiment variables (business and consumer confidence, uncertainty, and volatility) within three large and advanced economies (Europe, Japan, and the US), an area which has been left relatively unexamined. We observe a strong response of the economic sentiment variables in the US to a QE shock. Over a longer time-horizon, the forecast error variance decompositions show that the US is the only economy where the QE shock accounts for a large and persistent portion of the variance in the economic sentiment variables across the different specifications used. The shocks in Japan and Europe tend to account for a very small amount of the variance in the corresponding variables, even at longer time horizons.

Keywords: Quantitative easing; Confidence; Uncertainty; Volatility; VAR (search for similar items in EconPapers)
JEL-codes: E52 E58 O51 O52 O53 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1057/s41294-024-00233-1

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