Unconventional Monetary Policies and Quantitative Easing in Japan, the United Kingdom and the Eurozone – a comparison

In the wake of the financial crisis of 2007, the largest economies of our times struggled hard with adverse economic shocks. Several central banks (CBs) employed their conventional monetary policy tools to their limits and beyond. When failing in their attempt, unconventional monetary policies got gradually introduced in order to stimulate the overall economy, to alleviate market dysfunctions and to reduce liquidity shortages. Building on diverse research conducted by international researchers and data provided by international economic institutions, this paper gives a comprehensive overview of different types of unconventional monetary policy tools that were, and still are, broadly employed. The concept of Quantitative Easing (QE) with its opportunities and risks will be elaborated, as well as appropriate exit strategies from these unconventional monetary policy measures. Putting a special focus on the QE programs run by the Bank of Japan, the Bank of England and the European Central Bank, the successes and failures of real-world examples of unconventional monetary policies will be analyzed in detail. In order to evaluate the usefulness of QE, a comparison of theoretical and real-world results will be conducted. The paper finds that even though QE had a broad range of positive effects on selected economic aspects, the risks of both over-indebtedness and a too strong dependence of economies on highly accommodative monetary policies prevail. Before considering an exit from QE – if still possible at all – many years of further monetary easing and economic stimulus will pass. The raison d’être of unconventional monetary policies, mainly QE, over an extent period of time is doubtful and will have to be closely monitored in the years to come