Joint Committee on Finance Public Expenditure and Reform

July 8 2015

Quantitative EasingDoes it work and what are the risks?

Dan O’BrienChief Economist

Institute of International and European Affairs

Does it work?

IMF assessment of QE* well reflects the degree of uncertainty over its effects

• “Appear[s] to have boosted growth and prevented deflation, although these effects are difficult to measure”.

• “The biggest obstacle to obtaining a clear view of the effects on growth and inflation is establishing the proper counterfactual”.

• “Despite this caveat, the empirical findings to date support the view that both GDP growth and inflation were raised by bond purchases”.

“GLOBAL IMPACT AND CHALLENGES OF UNCONVENTIONAL MONETARY POLICIES, IMF October 2013

QE: Not so big in Japan

Resort to QE early in the crisis appears to have helped growth…

2008Q1 2010Q1 2012Q1 2014Q2

-8

-6

-4

-2

0

2

4

6

8

10

% change in GDP since 2008

US

UK

EA

…but impact on consumer price inflation is (even) less clear

Risks and downsides

Asset price inflation

Thank you.

dan.obrien@iiea.comTwitter @danobrien20