Question

- Explain the non-conventional monetary policy: the quantifying easining.

Answer 1

Unconventional monetary policy are measures that are not traditionally used to alter market. Such as use of negative interest rates, expansion or contraction of balance sheets to influence interest rates.

Credit easing is a way by which government purchases mortagge backed securities which leads to government holding more assets and balance sheets expands. This action leads to more money supply and liquidity in the economy. It also leads to lower interest rates and more credit extended.

And vice versa for contraction where they sell securitites, shrinking money supply and liquidity in the market, thus higher interest rates and low credit.