Before the Great Financial Crisis of 2008-09, significant reductions in
official interest rates in developed economies, often alongside fiscal
stimulus, typically proved sufficient to generate sustainable economic
recoveries from downturns. The exception was Japan, which despite rock
bottom interest rates and fiscal stimulus, experienced a "lost decade"
of growth and deflation after the bursting of its massive real estate
and stock market bubbles in 1989. In 2001 the Bank of Japan embarked on
a new policy, which switched from targeting the price of money (interest
rates) to the quantity of reserves it held - quantitative easing (QE).
This book offers a thorough and perspicacious analysis of QE, what has
become a recovery method of last resort, and will be essential reading
for anyone wanting to understand central banking's role in the national
economy. The crisis of 2008-09 pushed policy-makers in a number of
developed economies to embark on large programmes of QE that were
implemented intermittently over several years. Whilst it was successful
in stimulating growth, it remains controversial and continues to promote
widespread debate in economics, financial and political economy circles.
Not least because, with interest rates still at, or close to, the
zero-bound in most countries and the economic expansions in some
countries now becoming relatively mature, it is likely to be a key tool
when the next major slowdown emerges.
