The so-called quantitative easing refers to the expansion of a certain amount of money issuance, and easing is to reduce the pressure on bank reserves to inject capital. When the securities of banks and financial institutions are purchased by the central bank, the newly issued coins are successfully invested in the private banking system.
It mainly refers to the intervention mode that the central bank increases the basic money supply and injects a large amount of liquidity into the market by purchasing medium and long-term bonds such as government bonds after implementing the zero or near zero interest rate policy. Unlike traditional tools such as interest rate leverage, quantitative easing is regarded as an unconventional tool. Compared with the daily transactions of short-term government bonds conducted by the central bank in the open market, the government bonds involved in the quantitative easing policy are not only much larger in amount, but also longer in duration.
The term "quantitative easing" was proposed by the Bank of Japan in 2001. It means that the central bank deliberately creates new liquidity for the economic system to encourage spending and lending by injecting excess funds into the banking system, including printing a large amount of money or buying government and corporate bonds to keep the benchmark interest rate at zero. Generally speaking, monetary authorities will take such extreme measures only when conventional instruments such as interest rates are no longer effective.
(Editor in charge: Wu Xiaojuan)
