QE Policies: A Case Study

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Normally country’s central bank use macroeconomic tool to slow down an economy or influence macroeconomic conditions. Policies are enacted by a government can classified into 2 main policy which are contractionary policy and fiscal policy. First the contractionary policy is used by the country bank to reduce the money supply and eventual the spending in a country. This is through with increasing interest rates, increasing reserve requirements, and reducing the money supply, directly or indirectly. On the other hand, the fiscal policy is uses to affect the economy attempt to improve unemployment rates, influence inflation as well as control interest rates. This is through with lower tax rates and then attempt to fuel economic growth. However, since economic already had two macro tool to implement for the purpose to control markets why quantitative easing still need to adopt. Actually, QE is considered when short-term interest rates at or…show more content…
Generally, QE lowering interest rates and then affects assets prices it also inclines to depreciate the currency in particular way. Normally, other policies through asset and currency movement will bring impact on other economies. However, based on QE policies it merely mainly aimed at domestic policies via domestic markets and assets. It means that QE policies focus on domestic economy rather than other countries economy (Subramanian, 2014). Moreover, the external effects of QE policies not have much significant impact on other countries because of their effects usually is on domestic. This also can count as an important effects from QE it is because of that through domestic asset prices on the domestic economy. Thus, in fact, the effect of QE typically is to increase demand for domestically products without necessarily decrease demand for foreign goods. As a result, QE enhance aggregate demand of global for goods and

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