Title: On the impact of quantitative easing
Authors: Nektarios Michail - Cyprus University of Technology (Cyprus) [presenting]
Abstract: Transmission channels through which asset purchases are supposed to affect the economy are examined using US data in a Bayesian VAR setup. Once we distinguish between GDP components, in order to account for the increase in government spending during the period, the results suggest that quantitative easing is likely transmitted to the economy only through the portfolio rebalancing channel. No support is found for the uncertainty and expectations channels. Asset purchases lower the cost of public debt, which assists in increasing government spending, to some extent. The conclusions are the same regardless of using monthly or quarterly data. Overall, asset purchases may have eased funding conditions albeit they had little impact on the real economy. It appears more likely that QE was just beneficial in lowering the governments cost of debt, without whose increase it would be unlikely that the economy would have been affected.