http://money.cnn.com/2014/11/06/investing/ecb-stimulus-draghi/index.html?iid=SF_E_River
This article explains current happenings in the European Economy and plans for further Quantitative Easing.
The European Central Bank plans to keep the interest rate low at 0.05%, as well as increase government spending by about 1.25 trillion dollars. These effects combined should increase not only investment but national income as a whole.
Some believe that these stimuli are not enough, so the ECB has announced plans of quantitative easing to increase the scope of their government spending to include corporate bonds and other assets.
It will be interesting to see the actual effects of these plans and to judge whether or not they worked well.
The European central bank plans for further quantitative easing while the US will be tightening their policies regarding QE. It will be interesting to see the impact it will have on the global economy.
ReplyDeleteFinally the EU has realized it needs to increase government spending if it wants to get out of their long recession. Hopefully this spending increase gets the EU zone back up to where it was before 2008. If that happens the entire world will benefit from the EU's growth.
ReplyDeleteTo me 1.25 trillion seems like a huge number. The ECB is a central bank like the Fed, however it is controlled by other larger banks within the EU, so it should be interesting to see how they exactly come up with this funding. They will most likely sell a lot of bonds or other similar assets, and it will be interesting to see how much FDI they get and how this increased government spending stimulates EU economies.
ReplyDeleteWe learned in class that when the central bank implements expansionary policies at the same time as the government that the economy is much better off. Output increases but the interest rates don't rise significantly. I agree with Christopher that it's nice to see the Euro zone increasing government spending since that is essential to growth.
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