University of Bath

A very large gamble: evidence on Quantitative Easing in the US and UK

An IPR Policy Brief reviewing the impact of Quantitative Easing on financial markets and on output, employment and inflation.

Quantitative Easing (QE) has been used in the UK and US as an unconventional monetary policy response to the financial crisis. QE involves large scale asset purchases by Central Banks, amounting to $3 trillion in the US and £375 billion in the UK, about 20% of GDP in both countries. But is there any evidence that QE actually works?

Research conducted by Professor Chris Martin at the University of Bath and Professor Costas Milas at the University of Liverpool, has reviewed evidence on the impact of QE. Assessing policy impact from ‘event studies’ and from econometric models, they analysed the effect on financial markets and on output, employment and inflation. They conclude that QE has produced a limited but probably temporary gain for the financial sector, but that there is little evidence that it has given a significant boost to output or employment.