Finance

                                         Finance



Since the financial crisis in September 2008, central banks have greatly expanded the scope of its tools to stimulate economies by cutting interest rates to the zero lower bound and taking on unconventional measures such as “quantitative easing” (QE). In consequence, there has been commensurate increase in the monetary base together with a tripling or quadrupling of the size of central bank balance sheets. However, these actions have had much less impact on bank lending and the broad money aggregate. In particular, the money multiplier, which was reasonably stable under normal conditions, experienced unprecedented plummeting to less than half of its pre-crisis level (see Figure 1 for the empirical movements of the M0 stock, the M2 stock and the money multiplier in the U.S.).




                                                                 Urooj Qureshi