Analysis On Effect Of Federal Reserve’s Quantitative Easing Monetary Policy

In response to the2008financial crisis, the Fed implemented a quantitativeeasing monetary policy. On the basis of the existing domestic and internationalresearch, combined with qualitative and quantitative analysis, the paper does asystematic research on the effect of quantitative easing monetary policy, At thebeginning, the paper analyzes the emergence, development and evolution of thequantitative easing monetary policy, discussing its theoretical basis and transmissionmechanism. Next, the paper conducts a comprehensive study on the implementationof quantitative easing monetary policy, including its background, goals, specificcontent and features and a detailed description of the new monetary policy tools thatcreated during the implementation of the quantitative easing monetary policy has beenpresented too. In chapter four, the paper emphatically analysis the effect of Fed’squantitative easing monetary policy by using large amounts of date and charts. Theresearch is divided into two levels: positive effects and negative effects. The positiveeffects mainly include how the policy has eased the situation of the U.S. credit crunchand stabilized the financial system. The specific performance of the former is that alarge number of base money had been put into the market by Fed; interest ratedifference of LIBOR-OIS had recovered to pre-crisis level; government bond yieldhad been lowered and the financial system had been stabilized. The specificperformance of the latter is that the main stock indexes were steadily recovering;interest rate difference of commercial paper had fallen; the financial stress indexeswere back to normal levels; both domestic consumption and investment had increased.Meanwhile, there shows some negative effects too. For example, because of the riseof the international commodity prices, including international crude oil prices,non-ferrous metal prices, currency of some countries are passively appreciated and major trading partner of U.S. have been affected to varying degrees, then theeconomies that had been affected may take trade protection measures, which makesthe chance of trade friction rise and contribute to trade protection. In chapter five, thepaper briefly analyses the monetary policy. First, through the analysis of U.S.macroeconomic indicators, it can be found that quantitative easing monetary policyhas played an important role in the recovery of U.S. economy, which made the realGDP growth return to positive, the core inflation rate be at2%, the unemploymentrate began to decline. The policy help boost the U.S. economy out of thedownturn——the country’s industrial production and capacity utilization rate havesignificantly improved. Second, the effect of monetary policy on the sluggish realestate market is limited. The real estate market still has no improvement, whosetransactions, turnover and prices continues to fall. Third, with a large number ofdollars injected into the market, the depreciation of the dollar is unavoidable. As theU.S. dollar is the world’s major reserve currency, its depreciation has made othercountries and regions, which hold the dollars in cash or in fixed income assets (suchas U.S. Treasury bonds) suffer losses. The creditor nations of the United States havesubjected to different degrees of damage, which means the quantitative easingmonetary policy has played a role in diluting the U.S. debt.