Quantitative Easing: The Exit Strategy

            The Fed has recently announced that it will renounce to Quantitative Easing policy. Alan Blinder has a very interesting material that explains pretty well the rationales for why has the FED chosen this approach, how was implemented and what are the exit strategies.

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Is US in a Liquidity Trap?

Explaining the crises (not all, but many of them) as being liquidity traps is not only a misinterpretation but it also leads to false solutions. Just look at the case of Japan after two decades of “policy experiments”. (New) Keynesians like Krugman have reduced its stagnation problem to a liquidity trap and prescribed a wrong therapy which in the end failed to lead to real economic growth. But probably the case of Japan deserves a separate discussion.

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Does Quantitative Easing Cause Inflation?

Following the effects of the last financial crisis, as the nominal interest rate hit the zero lower bound, the central banks in United States, Euro Area and United Kingdom (to be more precise, it was the Bank of Japan that experienced this approach first) have started to implement a rather extreme form of unconventional monetary policy which became known as the Quantitative Easing.

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