Browsing by Subject "Quantitative easing"

Using an explanatory case study of the European Central Bank (ECB), this thesis studies the role quantitative easing has played in increasing central banks’ power following the Global Financial Crisis. Increases in central banks’ responsibilities and the reach of their operations have taken place at the outset of quantitative easing. Yet, despite having been a central monetary policy tool in contemporary central banking, no previous research exists on this development. To take into consideration the structurally powerful position central banks have in the modern world; the various transmission mechanisms and thus the reach of quantitative easing; as well as the role the global financial system plays in central banking, the thesis utilizes the theory of four sources of structural power together with global network structures. Through explanation building, the thesis builds a case of the ECB that reveals the power quantitative easing has unleashed via the unprecedented expansion of the ECB balance sheet and, ultimately, the control over the availability of money. Quantitative easing has also provided the ECB with new capabilities—direct control over market pricing—and responsibilities—possibly the most important of all, its new role as the sovereign bond buyer of last resort as the protector of the Eurosystem. While quantitative easing has challenged the traditional understanding of monetary policy, the justification for central bank independence, and the belief system behind the ECB, the ECB has managed to maintain its independence and position as the moral authority and expert on monetary policy. The thesis concludes that while quantitative easing may have increased the ECB’s structural power, it has not necessarily translated into positive effects for the central bank. Quantitative easing has disincentivized structural reforms in the indebted member states, which have benefitted from the ECB buying their low-demand government bonds; and increased distributional effects favoring the top wealth and income distribution, which have both ultimately led to claims of the ECB operating outside the bounds of monetary policy.