Last month ¡ª just a few days before the European Central Bank announced its intention to initiate quantitative easing (QE) ¡ª I attended a seminar in Geneva with journalists, policymakers and investors. The discussions there, much like those in Japan before Prime Minister Shinzo Abe launched his groundbreaking economic-reform strategy in 2012, reflected an inadequate understanding of unconventional monetary policy¡¯s transformative potential.
Indeed, at the seminar, European economists and journalists ¡ª especially the Germans, and even some of the Britons in the room ¡ª adopted a dismissive tone. ¡°Monetary policy¡¯s power is limited, particularly when the interest rate is so low,¡± some said. ¡°We cannot count on accommodative monetary policy to spur a portfolio reshuffling,¡± others added.
These statements were all too familiar ¡ª and somewhat surprising, given the progress that Japan¡¯s ongoing QE-based strategy has enabled the country to make. Clearly, many in Europe lack an understanding of the history and significance of ¡°Abenomics¡°; but such an understanding should inform their monetary policy debates.
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