After the 2008 Global financial crisis, the Federal Reserve (Fed) initiated Quantitative Easing (QE) programs in order to inject liquidity into markets in the form of purchases of mortgage and government bonds. The objective of these policies was primarily to reduce interest rates, encourage credit expansion, and spur economic recovery. In this context, this study assesses the macroeconomic effects of Quantitative Easing in the United States employing a Structural Vector Autoregression (SVAR) framework, using quarterly data spanning the period from 2003Q1 to 2025Q1. The findings of estimation indicate that QE shocks have a significant effect in reducing long-term treasury yields, weakening the U.S. currency against the Euro currency, and opening up credit channels in the short run. The impact on GDP is shown to be initially adverse, reflecting delay in absorption of liquidity in real sectors. The effect of inflation in response to QE is also shown to be limited in extent, implying that injected liquidity mostly remains in financial markets and not stimulating real demand. The rate of unemployment is shown to first increase in response to shocks in QE, reflecting the delay in transmission of monetary expansion into productive investment. These findings highlight the subtle and often delayed transmission processes of QE and call for complementarity of monetary policies in order to enhance real-sector recovery and employment generation.
Jabiyev et al. (Mon,) studied this question.