Quantitative Easing by BOE and Fed since 2008
ABSTRACT
Following the collapse of Lehman Brothers in
September 2008 financial market turmoils intensified. Various measures were carried out to stabilize the financial system. This report will depict and analyze the quantitative easing activities of the US Federal Reserve and the
Bank of England as a reaction to the world financial crisis from 2007 to 2009. The paper concludes with a critical valuation of the taken measures and gives an outlook on the future of the monetary easing.
Quantitative Easing
Table of Contents
Introduction ............................................................................................................ 2
Definition of Quantitative Easing .................................................................................... 2
Potential risks of Quantitative Easing............................................................................... 2
Application of Quantitative Easing by the US Federal Reserve.................................................. 3
Application of Quantitative Easing by the Bank of England...................................................... 4
Critical Valuation and Outlook ....................................................................................... 5
Bibliography ............................................................................................................ 6
1|Page
Introduction
After Lehman´s collapse and the bailout of AIG in the mid of September in 2008, liquidity quickly dried up as a consequence of lost confidence within the financial system. Banks were not willing to lend money to each other, even overnight (Putnam, 2013: p.1). Both fiscal and monetary policy measures were carried out to stabilize the financial system as well as the economies.
Both the Bank of England and the US Federal Reserve lowered the overnight federal fundsrate to its zero lower bound, facing financial market turmoil, a weak economic outlook and a threat of price
Following the collapse of Lehman Brothers in
September 2008 financial market turmoils intensified. Various measures were carried out to stabilize the financial system. This report will depict and analyze the quantitative easing activities of the US Federal Reserve and the
Bank of England as a reaction to the world financial crisis from 2007 to 2009. The paper concludes with a critical valuation of the taken measures and gives an outlook on the future of the monetary easing.
Quantitative Easing
Table of Contents
Introduction ............................................................................................................ 2
Definition of Quantitative Easing .................................................................................... 2
Potential risks of Quantitative Easing............................................................................... 2
Application of Quantitative Easing by the US Federal Reserve.................................................. 3
Application of Quantitative Easing by the Bank of England...................................................... 4
Critical Valuation and Outlook ....................................................................................... 5
Bibliography ............................................................................................................ 6
1|Page
Introduction
After Lehman´s collapse and the bailout of AIG in the mid of September in 2008, liquidity quickly dried up as a consequence of lost confidence within the financial system. Banks were not willing to lend money to each other, even overnight (Putnam, 2013: p.1). Both fiscal and monetary policy measures were carried out to stabilize the financial system as well as the economies.
Both the Bank of England and the US Federal Reserve lowered the overnight federal fundsrate to its zero lower bound, facing financial market turmoil, a weak economic outlook and a threat of price