Analysis Of The Influence Of Quantitative Easing On Inflation

The monetary policy of quantitative easing has been controversial since its implementation.It has increasingly become a hot topic in the academic community and people have mixed opinions on the effects of this policy.Facing the 2008 financial crisis and the failure of conventional monetary policy caused by the zero interest rates floor,the Federal Reserve rescued the financial market through the implementation of unconventional monetary policy,repaired damaged financial institutions and the blocked monetary policy transmission channels.Quantitative easing is the most important method of unconventional monetary policy.The Federal Reserve has created a new model of intervention in the economy in human history through a large number of tool innovations with a large amount of liquidity injection into the market.Quantitative easing,on the other hand,it can relieve the pressure of the capital market and provide sufficient liquidity for banks and other financial institutions.From2008 to 2014,the federal reserve implemented four rounds of quantitative easing monetary policy,and the balance sheet of the federal reserve expanded at an average annual rate of 60.32%.At the very beginning of the quantitative easing monetary policy,some economists predicted from the theory of money supply that there would be severe inflation in the United States during the implementation of the quantitative easing,but the fact is that since 2008,all economic indicators have shown that instead of severe inflation,the average inflation rate is at a low level below 2% in the United States.This paper argues that the failure of the Fed’s quantitative easing monetary policy to cause serious inflation is the result of a combination of subjective and objective factors.Objectively speaking,during the period of quantitative easing,some of the variables in the transmission channels of monetary policy failed to change the structure of the money supply,the currency multiplier dropped,and the real money supply did not grow as dramatically as the Fed put in the basic currency,so it was not enough to cause serious inflation.The money supply in the market depends on the central banks,commercial banks,and market entities.Among them,the basic money supply of central banks in various countries is the basis and source of money supply.The credit expansion of commercial banks and the demand of market entities forloans and cash are the key factors that ultimately determine the amount of money supply in the market.This is affected by the situation of a country’s credit market.Poor credit market conditions will lead to the increase of the cost of the market as a credit intermediary.,The increase in the cost of screening information by financial institutions will also reduce the number of high-quality borrowers in the market,insufficient market investment activities,and the demand for money,resulting in a decline in the money supply;Subjectively,the Fed’s control and precision over the amount of money released is also the main reason for the low level of inflation in the United States.According to the above analysis,this paper constructs a vector autoregressive model to analyze the various variables in the process of quantitative easing monetary policy transmission,and to find the failed conduction variables.Then from the two aspects of money supply theory and the failure of credit market,this paper analyzes the effect of these failure variables on the level of inflation,and finally puts forward constructive opinions based on the characteristics and specific conditions of monetary policy implementation at present.