Quantitative easing and other unconventional monetary policy measures did not have the positive results that many economists and politicians expected. In fact, it remains exceptionally difficult to get credit. However, it is indisputable that these measures of mass liquidity deployed by central bankers over the last 18 months are having a positive impact on investors' confidence judging by the recent performance of the world's stock markets. Still, the jury is still out and it may take years to assess the full influence of quantitative easing on the economy.
Indeed, quantitative easing (QE) might have been a significant factor in the recent stock markets recovery.
Certainly, the massive scale of government bonds purchases by central banks, especially in UK and US, boosted a much needed liquidity and provided financial institutions with resources to survive the downturn. Eventually, a sharp lowering of bond yields and an inflow of cheap money helped to revive the stock market, which has risen significantly since March. Moreover, the recent recovery in asset prices, has helped corporations to refinance their portfolios and pay off bank loans.
On the other hand, quantitative easing is clearly not helping the real economy because it hasn't boosted bank lending as much as it was expected. The reality is that money from treasuries sale has been stuck in the banking system in a liquidity trap as commercial banks put money obtained from selling treasuries in deposits instead of giving it away in the form of new loans to business owners. From June 2008 to June 2009, reserves held by commercial banks with their central bank doubled in the Euro Area, and increased by an even greater percentage in the United Kingdom and the United States.
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