Forward Guidance Versus Quantitative Easing Which One Worked?

In total, the Fed spent more than $4tn in its various rounds of bond buying. Most academics agree that the first round of printing money was a success – it was big enough, and lasted long enough, that it almost certainly prevented a more dire economic situation.

The jury is still out on the subsequent rounds of bond buying. One study found that QE2 was only a third as effective as the first round of QE.

Another paper, published by the San Francisco Federal Reserve Bank, found that QE2 added just 0.13 percentage points to the annual rate of economic growth in 2010, which was at 2.8% when the programme was implemented.

The authors of that paper argued that it was the Fed setting expectations about when rates would rise that gave people the confidence to invest, not printing money.

via BBC

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza