A Literature Study for the Spillovers of Quantitative Easing

Abstract

Quantitative easing, as an unconventional monetary policy, was often adopted by major central banks after the 2008 financial crisis. Different from the conventional monetary policy, that is, the central bank injects liquidity into the financial market by adjusting the benchmark interest rate and open market operations, the core of quantitative easing is to increase the balance sheet of banks in the short term through asset purchases and other behaviors to achieve the purpose of stimulating the economy. From 2008 to 2020, the United States adopted five quantitative easing policies to deal with economic downturn risks. While alleviating its own economic recession, it also had a strong spillover effect on China and other countries. Although quantitative easing has alleviated the economic crisis in the United States in practice, it has had an adverse impact on the entire world economy, making the whole world bear the consequences of the economic crisis together. This article summarizes scholars' research on the role, effectiveness, and spillover effects of quantitative easing policies, and summarizes the factors that affect the size of the spillover effects. Finally, through the analysis of the international transmission theory and transmission channels of inflation, it explores the impact of the US quantitative easing policy on China's inflation rate.