Quantitative Easing and Financial (In)Stability

Many central banks have introduced quantitative easing (QE) as a new policy tool where they massively buy bonds from market participants to provide liquidity to the market, reduce the cost of capital and ultimately foster economic growth. Although such monetary policy measures by the Federal Reserve and the Bank of Japan seem to have had the desired effect in the home market, there are still many open questions about the effectiveness of QE with respect to its global impact. These policies (and unwinding them later on) have an impact on the stability of financial markets and financial institutions, not only in industrialized countries but also in emerging markets.

This project aims to analyze the potential effects of QE, in particular on the pricing of financial assets, the risk taking by banks, and the spillover effects to emerging markets. The project proposes a new approach to address the topic from a banking and finance perspective.

Key questions:

  • How much of the current recovery can actually be attributed to monetary policy intervention, and, in particular, which tool was the most effective?
  • What are the consequences of the enormous monetary expansion for financial markets stability? How does it affect risk-taking by banks, and systemic risk more generally? Are there spillover effects to financial institutions and markets in emerging economies, like India, China, or some African countries?
  • If some day central banks want to reverse their current extremely lax policy stance, what will happen to securities markets and the banking system? Which withdrawal symptoms should we expect, in terms of negative economic growth and financial instability around the world?

Project Team


Closing Conference

The final conference of "Quantitative Easing and Financial (In)Stability" funded by Volkswagen Foundation took place on 1 April 2019 at Goethe University Frankfurt.

The agenda and presentations can be found , a summary of the event can be found here.


Project Publications

Working Paper

Author/sTitleProgram Area

News & Activities

Closing Conference of the Project "Quantitative Easing and Financial (In)Stability"

At the House of Finance, the team members of the international project came together and discussed their…

New Working Paper for "Quantitative Easing and Financial (In)Stability"

The paper "An arbitrage-free yield net model with application to the euro debt crisis" by Zhiwu Hong and…

New Working Paper for "Quantitative Easing and Financial (In)Stability"

A new paper analyzes the effects of Quantitative Easing on international financial asset returns through the…

Matthias Thiemann at the NYU Stern

Research stay in New York: Discussions and conferences

Loriana Pelizzon Appointed as Full Member of the Advisory Scientific Committee of the ESRB

SAFE Professor will advise the European Systemic Risk Board for the next four years

Linlin Niu at the National University of Singapore

Research stay in summer 2018: work on resubmission of a paper

New Project Output "Quantitative Easing and Financial (In)Stability"

SAFE Working Paper on the impact of the Quantitative Easing by European Central Bank

Valuable Input on Paper "Central Bank-Driven Mispricing"

Top researchers from universities such as Harvard, Stanford and University St. Gallen have commented on the…

Presentation at the JAFEE Conference

Reiko Tobe presented a paper on Quantitative Easing in Japan

Postdoc Jesper Riedler joined the project ”Quantitative Easing and Financial (In)Stability”

Jesper Riedler joined the UCT team and is studying the effects of unconventional monetary policy on financial…

Second Project Workshop "Quantitative Easing and Financial (In)Stability"

Project team meets in Tokyo

Max Riedel at the NYU Stern for the Project "Quantitative Easing and Financial (In)Stability"

Research stay will produce new project paper

Davide Tomio is now Affiliated to the Darden School of Business of the University of Virginia

As an Assistant Professor, Davide Tomio is teaching courses in valuation and derivatives

Allan Davids Visits Oxford University for the Project "Quantitative Easing and Financial (In)Stability"

Workshop and research visit to benefit from the Oxford Group’s extensive knowledge of agent-based models

Project Output Presented at the AFA Meeting

A paper of the project "Quantitative Easing and (In)Stability" was presented in Chicago

Allan Davids Joins the Project Team of "Quantitative Easing and Financial (In)Stability"

PhD student from UCT complements research team

First Project Workshop "Quantitative Easing and Financial (In)Stability"

Project team meets in Cape Town

Presentation of Findings in Cape Town

At the conference “Financial Intermediation in Emerging Markets” and a subsequent workshop, first project…

International SAFE Researcher Team Receives Large Research Grant

Project on “Quantitative Easing and Financial (In)Stability” funded by Volkswagen Foundation

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    ... in industrialized countries

    ... in emerging countries


    QE impact on financial institutions ...

    ... in industrialized countries

    ... in emerging countries