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Quantitative tightening in the euro area

The Sound of Economics

CHAPTER

The Importance of QE in a Crisis

QE remains a policy for stimulus, even if you intend it for something else. The only way to avoid QE becoming Hotel California is to deal with the Bank of England did in this very, very specific incident and say, we're going to do QE, but it's not going to be that big. But I can imagine a scenario going forward when you have a huge liquidity crisis and the central bank can't be so limited in its announcement. And then the signaling effect doesn't work at all.

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