Abstract
We study the effects of Quantitative Easing (QE) in a heterogeneous-agents model with liquid and partially liquid wealth, and nominal rigidities. The direct macroeconomic effect of QE is determined by the difference in marginal propensities to consume out of the two types of wealth, which is large according to empirical studies. Therefore, the effects of QE on aggregate output and inflation are significant, according to the model. Indeed, the estimated model reveals that QE interventions greatly dampened the U.S. Great Recession, by expanding household liquidity. However, QE may have strong and adverse distributional effects, compared to interest rate policy.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
