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Quantitative Easing: The Challenge for Households Long-term Savings and Financial Security

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  • Christian Thimann

Abstract

The extremely low long-term interest rates in capital markets, to a relevant extent induced by quantitative easing, imply significant challenges for retirement saving and the stability of households’ purchasing power over the long-term. The reason is that prices for the two most important long-term savings objectives – housing and healthcare – are rising substantially, while long-term return in safe instruments is virtually zero. Savers face a major dilemma: either they miss long-term savings objectives and see purchasing power decline, or they compromise financial security and invest in highly volatile assets, such as equity, whose return is highly uncertain and potentially negative. This issue is especially relevant in Europe where equity markets are much less developed and where some major European indices are still today trading below the levels reached in the year 2000.

Suggested Citation

  • Christian Thimann, 2016. "Quantitative Easing: The Challenge for Households Long-term Savings and Financial Security," CESifo Working Paper Series 5976, CESifo.
  • Handle: RePEc:ces:ceswps:_5976
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    References listed on IDEAS

    as
    1. Ms. Prachi Mishra & Mr. Kenji Moriyama & Mr. Papa M N'Diaye & Lam Nguyen, 2014. "Impact of Fed Tapering Announcements on Emerging Markets," IMF Working Papers 2014/109, International Monetary Fund.
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    More about this item

    Keywords

    quantitative easing; savings; purchasing power;
    All these keywords.

    JEL classification:

    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General

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