According to Chairman Bernanke, the use of the term ‘quantitative easing’ is erroneous since it involves policies geared towards changing the quantity of bank reserves and, that is not exactly what the Fed is targeting. The precise term would be ‘securities purchases’, which are transactions that will affect the yield on those securities and on other assets as a result of substitution effects on investors’ portfolio.
The use of the term QE might generate negative reactions because of its failure in Japan. About a decade ago, Bank of Japan pumped money into commercial banks to combat deflation. However, the banks ended up keeping the money back, causing deflation rates to remain unchanged.
has the name itself caused negative reaction among the public? I have not seen any other articles regarding this 'name' mishap.
ReplyDeleteThis issue seems to be a bone of contention between the media and the Fed. Marc Schweitzer, Director of Research at the Cleveland Fed was very emphatic about not employing the term QE at the last Economic Outlook Conference and now the Chairman himself has raised concerns about it. Since it is a Fed policy, I will start employing the term 'securities purchases' myself. Better walk on the shoulders of the giants. The media is always out for sensation and tends to exaggerate.
ReplyDeleteI feel like the fact that it does have the name "Quantitative Easing" that it does provide some negativity just because some people knows what that implies and failures that it has caused. I think using "securities purchases" is a wiser decision.
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