Has Quantitative Easing (QE) proven to be an appropriate and effective response to the Great Recession in the United Kingdom and the United States? Compare and contrast QE in both countries from 2008 until the present time?
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Quantitative easing in the United Kingdom and the United States has proved to be a moderately effective tool. In the United Kingdom the QE means buying government bonds direct from the commercial banks (a). This creates central bank credits. It directly increases the bank's reserves. In the US the Federal Reserve expanded its balance sheet by adding new assets and new liabilities without sterilizing. In general the IMF has stated that quantitative easing has contributed to the reduction in the systemic risks following the bankruptcy of Lehman Brothers (b). The IMF states that these policies have contributed to improvements in market confidence.
Quantitative easing in United Kingdom is very different from that used in the United States. Between March and November 2009, the monetary policy committee authorized the purchase of 200 billion pounds worth of assets. In October 2011 the committee voted to make a further purchase of 75 billion pounds and subsequently in February the committee bought 50 billion pounds assets(c). The total assets purchase was $375 billion. These assets were purchased to inject money into the economy to boost demand. The asset purchase program in the UK does not directly purchase from banks. Instead it purchases gifts from private investors such as pension funds and ...
This solution explains the effect of quantitative easing in UK and the USA. The sources used are also included in the solution.