Quantitative Easing and Its Impact on Asset Price Dynamics: An Analysis of Cochrane and Coleman’s Research

– Quantitative easing (QE) is a topic of debate among finance academics and professionals.
– QE restructures the maturity of government debt in private hands.
– The Federal Reserve’s balance sheet shows that QE has not significantly impacted reserves or bonds.
– The impact of QE on asset prices, such as equities, is a point of contention.
– The fiscal theory of the price level (FTPL) provides a new model for understanding inflation.
– It is uncertain whether QE contributed to the bull market in equities and inflation in asset prices.
– The relationship between interest rates, risk premiums, and asset prices is complex.
– The level of nominal interest rates does not necessarily encourage or discourage risk-taking.
– Economic forces, rather than financing, primarily drive changes in risk premiums.
– Speculation using borrowed money and leveraged intermediaries play a role in asset price movements.