The European Central Bank embarked in 2015 on the so-called‘ quantitative easing’ already deployed by Japan, the US and the UK, after having already implemented many other extraordinary easing measures. These newer monetary policy instruments target longer-term interest rates than is the norm. Why might some accuse the ECB (justly or unjustly) of trying to prop up the euro zone economy at the expense of its trading partners? Explain thoroughly.
Quantitative easing means releasing an excess amount of currency in the market which reduces the interest rates to zero or near zero. An increased supply of the currency, in this case, the Euro also reduces the current value of the local currency as people demand foreign currency to invest in the markets where the return is really high.
A near zero rates promote lending and investment activity in the economy and depreciated value of the currency help the nation increase its exports while making imports costlier i.e. increase the demand for the local goods and make the foreign goods costlier.
The nations frequently trading with eurozone are the most affected by this, for example, US. People in Europe will demand less of American product because they have become costlier and more European product will be exported to the US. Adversely affecting the US economy.
Conclusion: Beggar thy neighbor policy or growing at the cost of the trading partner policy like quantitative easing are controversial because it promotes the exports of the nation at the cost of the trading partner and people justly criticise such policies of the nation.
The European Central Bank embarked in 2015 on the so-called‘ quantitative easing’ already deployed by Japan,...