OeNB Freitagseminar with Jesper Lindé

Macroeconomic and Fiscal Consequences of QE

OeNB Freitagsseminar with Jesper Lindé, IMF

Central banks have come under increasing criticism for large balance sheet losses associated with quantitative easing (QE), and some observers have also argued that QE helped fuel the post-COVID inflation boom. In this paper, we emphasize that the merits of QE should be evaluated based on its ability to stabilize the business cycle and inflation as well as its effects on the consolidated fiscal position relative to other means to provide stimulus. QE should not simply be evaluated on central bank profits or losses. Using a DSGE model with segmented asset markets, we show how QE can provide a sizeable boost to output and inflation in a deep recession and improve the overall fiscal position – even if the central bank ends up experiencing considerable losses due to an earlier than expected economic recovery. From a consolidated government perspective, we also find that QE can be a significantly more cost-effective tool to stimulate output and inflation than conventional fiscal stimulus. More caution is warranted in using QE in a shallow liquidity trap and when financial conditions are already loose. In such circumstances, a big asset purchase program may cause overheating ex post and lead to consolidated fiscal costs.

Date
Wednesday, 27 June 2025 | Start: 09:00 AM | End: 10:30 PM                    

Venue
The event is planned both, online via Webex and onsite at the Oesterreichische Nationalbank, Otto-Wagner-Platz 3, 1090 Vienna, Veranstaltungssaal.

Please register by 26 June 2025, at the latest.