Abstract
Chairman Bernanke’s hints about the end of quantitative easing (QE) have produced volatility in financial markets. This column argues that financial markets were startled because an end to QE is likely to cause capital losses for bond holders since term premium is substantially negative. Bank regulators should be alert to the possibility. This fundamental explanation is teamed with widespread confusion among market participants about how quantitative easing actually works.
Original language | English |
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Specialist publication | VoxEU |
Publisher | Centre for Economic Policy Research |
Publication status | Published - 22 Jun 2013 |
Externally published | Yes |