Economic Issues of QE2: Quantitative Easing

Good Essays
Introduction QE abbreviated as Quantitative Easing is the process that central banks use to stimulate the economy when all the traditional approaches prove to be ineffective. This is generally done by buying specific financial assets from other commercial banks and financial institutions ultimately leading to increase in the monetary base and reducing the yield of those assets. This is generally used to ensure that the inflation does not go below a specific rate. Some of the risks involved are resistance to deflation to a longer time or making bank to resist lending out their additional reserves (Arvind K, Annette V, 2011).
QE2 is the 2nd time the US Federal Reserve used Quantitative Easing to stipulate the economy. It was initialized in the fourth quarter of 2010 so that it can help to recover the recession that took place in the year 2008. The Federal Reserve brought 600 billion dollars treasuries in long term. This was expected to bring down the yields of treasuries and bonds thereby introducing an inflationary pressure on the economy (Joseph G, Matthew R, Julie R, Brain S, 2010).
Effect of QE2 on Employment Two reasons that explained why QE2 will not have a great effect on Employment are as follows
i. Some unemployment in the country is due to the fact that companies do not want people who do not have the skills that they expect. So this mismatch between skills sets of the unemployed people and the employer can never be met unless people can be trained in that
Get Access