The Impact of U.S. Quantitative Easing Policy on the Domestic Economic Cycle Based on HP Filtering

Abstract

With the deepening of global economic integration, the trend of global trade and financial integration is increasing in parallel, while the degree of interconnectedness and mutual influence among national economies is also increasing. This paper uses HP Filtering method and Granger Causality Test to verify and analyze the effect of quantitative easing policy on economic cycle based on CPI and PPI data. After the comparative analysis, it is concluded that after the implementation of quantitative easing policy, the economic cycle of the United States is less volatile and more stable. And the time in the boom period is significantly extended. However, the speed of recession begins to accelerate after the increase in magnitude. Therefore, the quantitative easing policy is a strong agent, which has a strong effect on economic stability and growth, but it also brings non-negligible after-effects. Countries should pay attention to the reasonable and appropriate use, otherwise it will trigger larger economic fluctuations which bring economic crisis.