Central Banks: An effective upper bound to QE?
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The balance sheet of the Bank of Japan is now equivalent to the country's GDP, yet inflation remains stubbornly low compared to the official target
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Years of quantitative easing have caused distortions in equity markets and weighed on liquidity in the market for JGBs
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There is concern that the marginal effect of BoJ purchases will wane, leading to an effective upper bound to QE. If this were to be the case, the relevance would go well beyond Japan and cause doubts about the effectiveness of more QE in case of a new downturn
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