After the Music Stopped by Alan S. Blinder

Author:Alan S. Blinder
Language: eng
Format: epub
Publisher: Penguin Group, USA
Published: 2013-01-06T16:00:00+00:00

VARIETIES OF QUANTITATIVE EASING

The Fed’s favorite unconventional weapon has been quantitative easing (QE), a term that encompasses a variety of ways to use the central bank’s balance sheet to improve financial conditions. Since the Fed has deployed this weapon multiple times and in several different ways, we need to spend a little time on it.

Since quantitative easing can take many forms, table 9.1 offers a simple two-by-two taxonomy. Quantitative easing operations might alter either the composition of the central bank’s balance sheet (the left-hand column) or the size (the right-hand column). The assets that the central bank purchases to do so can be either government securities (or Treasuries, the top row) or private-sector securities (the bottom row).* And, of course, many specific assets fall under the general term private-sector securities. That gives us the classification scheme shown in table 9.1. And as the entries in the table suggest, the Federal Reserve has tried every one of the four alternatives since the crisis began in the fall of 2008.

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