Economic Growth and Macroeconomic Stabilization Policies in Post-Keynesian Economics
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Economic Growth and Macroeconomic Stabilization Policies in Post-Keynesian Economics

Edited by Hassan Bougrine and Louis-Philippe Rochon

Hassan Bougrine, Louis-Philippe Rochon and the expert contributors to this book explore issues of economic growth and full employment; presenting a clear explanation to stagnation, recessions and crises, including the latest Global Financial Crisis of 2007-8. With a central focus on the role played by government spending, deficits and debt as well as the setting of interest rates, the chapters propose alternative policies that can be used by central banks and fiscal authorities to deal with problems of income inequality, unemployment and slow productivity.
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Chapter 12: The political economy of quantitative easing and the Fed: who gained, who lost, and why did it end?

Gerald Epstein and Juan Antonio Montecino

Abstract

This chapter studies the political economy of the Federal Reserve’s ‘quantitative easing’ (QE) policy by examining which business sectors of the US economy were expected to gain and which ones were expected to lose as a result of QE. The authors carry out an event study to estimate stock-level cumulative abnormal stock returns around the announcement windows for all three rounds of QE. Their results indicate that a broad subset of the US economy was expected to benefit from the first two rounds of QE, with large firms experiencing greater returns. However, the expected gains appear to have decreased over each round of QE. By QE3, only a few sectors, including some subsectors of finance, were expected to benefit, while a non-trivial set of sectors were expected to be harmed. The authors conjecture that this ‘QE fatigue’ among investors may help explain the Fed’s decision to end QE in 2014.

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