Assessing the Effect of Quantitative Easing on the US Economy from 2008 to 2015 by a Bayesian-VAR Model

摘要

From the huge financial crisis in 2008, central banks began to choose unconventional monetary policies to deal with the persistent economic recession and the most widely-used one is Quantitative Easing (QE). Since QE is a new tool for most countries, many economists try to figure out the macroeconomic effect of QE, which can be used in the policy decision. Most of research on this topic focuses on three indicators, GDP, CPI and the unemployment rate, and find QE has a positive effect on these indicators. However, one gap is that few researchers consider other important economic indicators and they tend to use similar econometric methods. Here my research involves another method, Bayesian VAR (BVAR), to do a counterfactual analysis in two scenarios based on different treatments on the 10-year interest rate for studying the macroeconomic effect of QE on other three variables, Nonfarm Payrolls, Personal Consumption Expenditure, and Industrial Production Index. Compared with the basic scenario with QE, there is no significant positive effect of QE on those three variables. Furthermore, I found the results are very sensitive to the change of the 10-year interest rate. In conclusion, QE is not a panacea as expectations and I strongly recommend that central banks should not continue to rely on QE in the next economic recession and instead come up with a new monetary policy. Since longer forecast horizons usually make the forecasts less informative, it is necessary for further research to find how to effectively isolate the effect of different QE programmes from each other and then do the conditional forecast for each QE period separately to shorten the forecast horizon.