Question

What are the main similarities and differences between QE in Australia, in the UK, in Japan; in the Eurozone; and in the USA.

(comparing to Australia)

Answer 1

Quantitative Easing is a form of unconventional monetary policy where the central banks in general purchases long-term securities in the open-market to increase the money supply in the economy and hence to encourage the lending and investment patterns in the economy. The following are the major features of the Quantitative Easing of the various nations as mentioned

Quantitative Easing in Australia

· The Reserve Bank of Australis spends huge quantities of cash it has created to ease the monetary policy of the nation

· The Reserve bank has allowed a $90 billion credit facility to banks and repurchasing agreements.

· The central bank has also agreed to buy a $5billion worth of government bonds across multiple maturities.

· Instead of paying for the bonds with existing money, the government is focused on entering the new ledger system that a $5billion of new money suddenly exists in the exchange settlement accounts held by the commercial banks

Quantitative Easing in UK

· The response to the global recession of 2008 in UK was to reduce the interest rates from 5% to 0.5% which meant it was cheaper for the households to borrow money.

· The Quantitative Easing of UK is based on this concept that larger investment in buying bonds would lead to lowering the interest rates which would make the borrowing process simpler.

· They focus on buying from the pension funds and investing them in other financially sound sectors and thus generate revenue from these sectors of the economy.

· The Quantitative Easing programme of 2020 has so far agreed to buying 745 billion pounds of bonds, which is about 20% of the GDP

Quantitative Easing in Japan

· The Bank of Japan has agreed to unlimited money printing program and the guidelines for buying government bonds have also been removed.

· They are focused on buying more Exchange Traded Funds [ETF’s] to a maximum of $ 1180 billion

· The program is also focused on providing cheap loans to firms have been affected by the virus outbreak

Quantitative Easing comparison of all nations including Eurozone, USA and other nations

· The Global Quantitative Easing asset purchases are likely to reach $6 trillion in 2020

· The balance sheet of the federal reserve of USA has increased from $4.3 trillion to $6.5 trillion due to increased purchase of US Treasuries.

· In the Eurozone, the European banks have purchased EUR120 billion during march and April 2020. It has announced an additional buy of EUR870 billion to reduce the crisis effects

· The Bank of UK and Japan, as discussed above has also taken QE measures so as to tackle the crisis