Monetary Policy And Analysis Of Nash Equilibria

Federal Reserve Chairman Ben Bernanke 's meeting dealt mainly with the issues that could stabilize the economy after the great recession. After creating a number of policies to fight the 2008 crisis, Chairman 's move to further reduce Quantitative Easing was a bit of a disappointment. The Fed will reduce its purchases of long-term Treasuries and mortgage-backed securities by another $10 billion a month. Apart from this, Fed is going to concentrate on maximizing employment rates, stabilizing prices and interest rates.

The idea that former Federal Reserve Chairman Ben Bernanke’s ‘Quantitative Easing’ program deserves the credit for healing the wounds inflicted on our nation from the housing collapse of 2008 omits two possibilities: that we actually haven’t recovered, and his policies have actually laid the path for an even greater collapse ahead. The Chairman’s actions hold no precedent, he himself has even admitted to flying blind. The bond and mortgage backed security purchasing program (known as Quantitative Easing’ or just ‘QE’) creating the artificial high by re-inflating asset bubbles was the easy part. To truly follow out the process an exit strategy must be laid to liquidate the nearly ‘$4 trillion dollars’ in toxic assets the Fed now holds

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Criticisms that the developed world’s central banks are directing wealth to the rich has made financial services employees uneasy. The response from these people argues that with quantitative easing’s distributional effects, it was a necessary to prevent an economic downturn.

However, I do not agree with the Fed’s policy of Quantitative Easing. In my opinion, QE has been detrimental to the recovery of the U.S. economy. It is because QE has caused the devaluation of U.S dollars, hyperinflation, and instability of the political system.

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The recent recession lasting from 2007 until 2009, and the effects of which are still highly visible in the U.S. economy, led the Federal Reserve to use new and largely untested methods for protecting the country from a total financial collapse. The new strategy, which blurs the lines between monetary and fiscal policy, had been attempted only once before, and is open to criticism from several difference angles. This report documents the history, purpose, and controversy surrounding quantitative easing as a strategy to mitigate the effects of the recent recession. After considering these factors, the conclusion is drawn that quantitative easing was a modestly successful policy, yet one which should not be employed again. Although

This gathering of governor was joined by leading academics, thought leaders, and commentators on monetary policy. The world of modern central banking and global finance had now entered a new phase of even more obvious artificiality and distortions. According to the author, Mohamed. El-Erian, “Ones whose skillful management of the price and quantity of money in an economy was key to containing inflation, promoting economic growth, and avoiding financial crises.” Since the global financial crisis of 2008, central bank has ventured, by necessity but not by the choice. They set the interest rates higher. For an unusually prolonged period, the central bank was bold policy experimentation. During that time, many of the economists thought that central banks had been forced to operate, and many of them wondered about it consequences. From the beginning of the financial crisis, there was the hope that courageous and responsive central banks would succeed in handing off the baton to high growth, robust job creation, price stability, and financial system. The world was in the process of grow out of its debts problems avoiding the debt defaults because the policy making entities were finally in the economic governance responsibilities and with the job returning and economic prosperity. The world changed in two important ways: one had to do with the analytics of central banking,

The Fed turned to unconventional monetary policy to create financial stability in order to prevent recession. In conventional monetary policy, the Fed raises supply of bank funds to lower interest rates. During a recession, the central bank will purchase only treasuries in the open market because they are risk free. However, that does not guarantee that the economy will be restored. So they turn to unconventional monetary policy when in severe recession. In unconventional monetary policy, as mentioned above, the Fed uses quantitative easing by lending a huge amount to banks or even firms. They purchase other securities, aside from T bills, in the open market to lower interest rates. The main goal is to lower interest rates.

Therefore, the quantitative easing adopted from 2009 was trying to gradually resume sustainable economic growth. Quantitative easing has helped to avert what could have been a second great depression (Wall Street, 2011). The US economy has been clawing its way out of the recession in 2009 and recovery has been slow compared to previous economic cycles. Regular review of the pace of securities purchase by the Federal reserve and the overall size of asset-purchase program in light of incoming information and adjusting the program as need be will help foster maximum employment and price stability.

Quantitative easing is an unusual form of policy used when interest rates are near 0%. Banks rouse the nationwide financial system when usual monetary policies have become ineffective. In recent decades the government Central bank has argued they are the government’s most important financial agency.

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According to what we are given, the rate of inflation is at an acceptable level of 2 % while unemployment rate is exceptionally high. The only way to counter this is by reducing the tax rates and increasing the government expenditure on both services and goods which is an expansionary policy. The reason for this policy is to first raise the budget deficit. For consumption and spending not to drop the fed can choose to increase the money supply to keep it high.

After the Global Financial crises of 2008, UK economy was severely affected and had dipped into recession. Thus, this led to a fall in market confidence, lower GDP growth and higher levels of unemployment. In order to boost the economy, expansionary monetary policies were adopted by the Bank of England. Interest Rates were cut to historic low of 0.5%. However, the economy was still not out of recession and conventional monetary policies failed to work even when interest rates were near zero bound. So, the central bank used unconventional monetary tools such as Quantitative Easing i.e. buying government bonds and injecting money into the economy. This policy was accompanied by a rather new policy known as the Forward Guidance in August,

Quantitative easing is a nontraditional monetary policy that the central bank used when the economy is in recession. The first country used quantitative easing, as monetary policy is Japan in 2001. It is getting well known when the United States of America adopted quantitative easing policy to boost its economy from the economic crisis that happened in 2008. In general, quantitative easing means that the central bank will print more money to buy long-term bonds from commercial banks or private sectors to increase the money supply in the financial market. By inputting more money to buy long-term bonds, it will lower the long-term market interest rate and increase the market price of the long-term