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Quantitative Easing Gone Global

Quantitative easing (QE) has now gone global since its introduction by the Japanese Central Bank in the early 2000s and its adoption by the US and European countries following the 2008 financial crisis. QE is a form of unconventional monetary policy where the central bank purchases longer-term securities from the open market to increase the money supply, encourage lending and investment. On Wednesday (06/17), emerging markets started implementing QE to bounce back from the economic downfall caused by the pandemic. The implementation of QE in EM is no longer considered taboo, although it is often deemed controversial for being associated with a "money-printing" policy. Even though it is riskier for countries that rely on borrowing in foreign currencies from global investors, several parties believed that it could be a useful policy to stimulate the economy when other options are washed-up, it can be success in countries that have the hard work essential to build pools of domestic capital and self-assurance in economic and fiscal authorities. One reason to be optimistic is the middle-income countries have started QE such as Croatia, Republic of Poland, and Rumania have launched their initial programs earlier this month, whereas the Hungarian Central Bank has started its bond-buying program.

Central banks from countries all over the world have also executed a policy of buying local-currency government bonds and other assets as a means to combat the economic downfall caused by COVID-19. This includes Poland, Philippines, South Africa, Turkey, and not to mention Indonesia, despite facing a financial turmoil. Unlike QE policies implemented before, this policy is going to be different, denoting the fact that numerous central banks have slashed interest rates to up to near zero. According to the benchmark of the JPMorgan EMBI Global Diversified index, sovereign bonds have escalated to up to 20 percent since March. This is also supported by the Fed's po