A CRITICAL REVIEW OF QUANTITATIVE EASING AND ITS IMPACT ON THE UK’S ECONOMY
1. proposed working title:
A critical review of quantitative easing and its impact on the UK’s economy.
2. Research background/context:
This is a research proposal which deals with quantitative easing and its impact on UK’s economy. The literature in this proposal mainly concentrates on monitory policy, UK’s economy and the factors led for implementing this policy. This pro-posal also deals with inflation, steps taken by monitory policy committee to re-duce inflation and the role played by central bank.
Quantitative easing is a form of injecting money into the economy in order to en-courage banks lending (Times Online, 2009). Some call this as printing money, but its not just printing money. Central banks supplies more money onto its bal-ance sheet and use this money to buy corporate bonds, government bonds, gilts and other asserts. Buying of these asserts and bonds help in send money directly into the economy (CNN, 2009). The main objective of this policy is to circulate cash flow in the economy in order to decrease inflation. To make these possible, central banks cut their interest rates almost equal to zero. This is because lower-ing the interest rates encourages people (or) organizations in lending money from banks through loans which in turn makes them spend more on developing their businesses and asserts (BBC news, 2009).
Even after cut down of interest rates if the inflation remains still and the cash flow in the economy is idle the only option is to go with quantitative easing (graham, 2008). This is because to fill up the gap in economy between potential supply and nominal demand. The crisis hitting global financial markets in the third quarter (q3) of 2008 damaged most of the banking and world’s financial sectors. This led in huge inflation and financial...