JBAFP 2019, 1(1); doi: 10.26870/jbafp.2018.01.003
ARE THE EFFECTS OF UNCONVENTIONAL MONETARY POLICY ON FINANCIAL MARKETS CAUSING BUBBLES?
Received: 26 Aug 2019 / Published: 2019-08-26
Cheap money can become very expensive in the long run. Unconventional monetary policies have been the main tools of central banks to tackle the economic crisis. In this paper we aim to understand whether these policies have created distortions in the fi nancial markets and if we can be concerned about the creation of “bubbles”, considering whether quantitative easing has impacted fi nancial asset classes’ valuations beyond reasonable fundamentals. I conclude that there is empirical evidence of inordinate expansion of multiples and that central bank policy makers should include “fi nancial market infl ation” as well as consumer price indices (CPI) in their assessment of infl ation expectations. I believe that this should be an essential analysis to avoid unintended consequences in the future, and a possible next fi nancial crisis that central banks will be unable to face with the same tools of the past.
Keywords: QE; interest rates; crisis; financial markets; monetary policy; money supply; debt; risk
This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. (CC BY 4.0).
Lacalle, D. ARE THE EFFECTS OF UNCONVENTIONAL MONETARY POLICY ON FINANCIAL MARKETS CAUSING BUBBLES? JBAFP 2019, 1, 0.
Lacalle D. ARE THE EFFECTS OF UNCONVENTIONAL MONETARY POLICY ON FINANCIAL MARKETS CAUSING BUBBLES? Journal of Business Accounting and Finance Perspectives. 2019; 1(1):0.
Lacalle, Daniel. 2019. "ARE THE EFFECTS OF UNCONVENTIONAL MONETARY POLICY ON FINANCIAL MARKETS CAUSING BUBBLES?" JBAFP 1, no. 1: 0.