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Inflation Dynamics and Quantitative Easing

Author

Listed:
  • Tarron Khemraj

    (New College of Florida)

  • Sherry Yu

    (New College of Florida)

Abstract

The paper studies the quantitative easing (QE)-inflation nexus, as well as other inflationary factors such as supply, demand, oil and fiscal shocks. Findings are: (i) QE can be seen as a complementary policy instrument for short-term stabilization; (ii) the interest rate instrument still produces paradoxical effects on inflation and output for short horizons in the post-2007 period; (iii) fiscal, supply and demand shocks exert the highest percentage effects on inflation in the post-2019 period, but QE and interest rate interventions also account for a sizable variation; and (iv) inflation takes a long time to converge or transition after a shock.

Suggested Citation

  • Tarron Khemraj & Sherry Yu, 2023. "Inflation Dynamics and Quantitative Easing," Eastern Economic Journal, Palgrave Macmillan;Eastern Economic Association, vol. 49(4), pages 613-638, October.
    • Handle: RePEc:pal:easeco:v:49:y:2023:i:4:d:10.1057_s41302-023-00257-y
    DOI: 10.1057/s41302-023-00257-y
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    References listed on IDEAS

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    More about this item

    Keywords

    Quantitative easing; Inflation; COVID-19; Fiscal deficit; Gibson’s paradox;
    All these keywords.

    JEL classification:

    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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