Unconventional monetary policies and the macroeconomy: The impact of the UK's QE2 and funding for lending scheme

In this paper we assess the macroeconomic effects of two flagship unconventional monetary policies used by Bank England during later stages global economic crisis: additional quantitative easing (QE) and introduction funding for lending scheme (FLS). We argue that these can be seen as complements, QE effectively bypasses banks attempting to reduce risk-free yields directly in order have a wider effect on asset prices, while FLS operates through reducing their costs increasing incentives lend. attempt quantify estimating impact long-term interest rates bank costs, respectively, then tracing out macroeconomy using simulations from large Bayesian vector autoregression (VAR), which are cross-checked with simpler Auto-regressive distributed lag (ARDL) approach. find second round Bank's purchases 2011–2012 initial phase each boosted GDP UK around 0.5–0.8%. Their inflation was also broadly positive reaching 0.6 pp, at its peak.