Quantitative Easing and the U.S Economy: Assessing the Impact

On October 29, 2014, the US Federal Reserve (Fed) decided to withdraw one of its most remarkable experiments in monetary policy, Quantitative Easing (QE), which it had begun implementing to beat the 2008 financial crisis. With the decision, the monthly purchases of assets by Fed would come to an end in November 2014. The U.S central bank started buying up longer-term securities in November 2008 – called QE1 – to fight the aftermath of the 2008 financial crisis. Later on, the scheme was extended twice as QE2 and QE3 by the then Fed chairman Ben Bernanke (Bernanke).QE, an unconventional monetary policy, was expected to boost the US economy after the traditional monetary policies failed to do so. It was expected to bring in stability after the 2008 financial crisis hit the domestic and global markets. The impact of implementing such a non-traditional policy remained unclear with some economists favoring such policies and others criticizing them. One of the major impacts was the increased size of the Fed’s balance sheet which nearly quadrupled from 2008 to 2014. Further, QE created additional demand for long-dated government bonds, bringing their prices up and yields down...