Hey,
I’m thinking to write my Master thesis in “The Fed’s quantitative easing effect on inflation” topic, but I’am a little bit lost in what ways I should analyze how QE effects inflation. I mean, what structure or analysis areas may (should) be?
Bellow is provided some intro in this topic
The official Fed goal of quantitative easing (further – QE) was to stimulate the economy by pushing banks to provide loans. It is well known that budget deficits are inflationary if they are money financed and less inflationary if they are bond financed. In nowadays U.S. debt is financed by money instead of bonds through QE. By this action, government seeks to avoid deflation and reach demand pushed inflation increment and in such a way to stimulate the economy.
It is popular today to hear that Fed’s QE is not working, as banks accumulate reserves and do nothing. But it is really true? Talking about core inflation, it has increased only slightly and remains bellow Fed’s desired one, but headline inflation is booming. The question arises if it is caused by speculation with QE money or just pushed by increased demand? It is not the secret that commodity prices are set by large commercial traders through future contracts. If too much money (via QE) reaches these traders, it is highly plausible that increased speculation in commodity market causes cost push inflation increase.
Thanks for help and sharing ideas.