| Popis: |
In response to the global financial crisis and the recession that followed, central banks in the United States and Europe applied conventional expansionary monetary policy tools such as interest rate cuts, but also the previously unconventional quantitative easing policies. Today, the Fed and the ECB are in a liquidity trap which means they cannot lower interest rates in order to respond to the new recession. Apart from being in a liquidity trap, central banks have accumulated historically high levels of securities in their assets due to large-scale asset purchase programs, i.e., quantitative easing programs. According to economic theory, an extended period of expansionary monetary policies should have resulted in inflationary pressures, but high inflation has been absent. The aim of this paper is to identify the causes for the absence of high inflation at the time of large monetary interventions by central banks. The main reason for the lack of inflationary pressures is in the decline of the money multiplier. In other words, although the monetary base has grown significantly, this growth was based on the growth of excess bank reserves held at the central bank accounts, while the money supply to the public has not increased significantly, i.e. the sizable increase in the monetary base did not end up in the hands of consumers. In addition to the inefficiency of quantitative easing in causing inflation, alternative explanations for the absence of inflation in the context of zero interest rates and highly expansive monetary policies are technological progress and globalization, population aging, inflation targeting policies of independent central banks, and the Neo-Fisher hypothesis. |
