M-RCBG Senior Fellow-Led Study Group: Paul Sheard

Session 1:  QE Basics – What it is and what it isn’t
September 25 4:00-5:30 M-RCBG Conference Room, Belfer 503

Session 2:  Comparing and contrasting the QE of the major central banks
October 23, 4:00-5:30 M-RCBG Conference Room, Belfer 503

Overview: Quantitative easing (QE) has been the principal tool used by major developed-world central banks to ease monetary policy since the Global Financial Crisis triggered the Great Recession of 2008-2009. Yet QE remains highly controversial and poorly understood among the public and even among many financial market participants. What is QE and how does it work? Is QE a legitimate policy tool for central banks to use? What is the difference between QE and CE (credit easing)? Why did many opponents of QE wrongly assert that QE would lead to runaway inflation over time? Does QE veer into fiscal policy territory? What is the empirical evidence about the effects of QE? How are central banks, led by the Federal Reserve, going to unwind their QE-bloated balance sheets? Will monetary policy ever be the same again? These are some of the questions we will pose and try to answer in this study group.

Background reading:

Session 1:  QE Basics – What it is and what it isn’t (September 25)
In this session, we will cover the basics of QE, starting with a quick explanation of how monetary policy works and QE’s place in a “flexible inflation targeting” regime. We will explain QE by looking at a simplified balance sheet of a central bank and cast light on why characterizing QE as “money printing” is misleading. Rather we will offer three complementary ways of explaining QE and how and why it works. 

Session 1 handout

Session 2:  Comparing and contrasting the QE of the major central banks (October 23) 
In this session, we will take a look at the different and similar ways in which the Federal Reserve, the European Central Bank (ECB), the Bank of England and the Bank of Japan both have implemented QE and described what they are doing. A fascinating picture will emerge of “sequential peer learning” among central bankers as, starting with the BOJ in March 2001, one central bank after another experimented with this “unconventional monetary policy” tool and then influenced the way other central banks subsequently adopted it. We will explain why the ECB faced a much higher hurdle to adopting QE than the other central banks. We will look at the Fed’s “exit strategy” and ask whether this can and will be the template for other central banks in the future when they come to their exits. Finally, time permitting, we may speculate on how QE might be used in a future economic downturn, particularly if central banks start with little or no interest rate ammunition. 

Session 2 handout


Paul Sheard headshot.Paul Sheard is a veteran central bank watcher and markets economist, who has written and spoken widely on QE and unconventional monetary policies. He most recently was Vice Chairman of S&P Global, after serving as Executive Vice President and Chief Economist and earlier Executive Managing Director and Chief Economist of Standard & Poor’s Ratings Services. Previously, he held chief economist positions at Nomura Securities and at Lehman Brothers and was Head of Japan Equity Investments at Baring Asset Management. Earlier, Sheard was Lecturer in Economics at the Australian National University (ANU) and Osaka Gas International Cooperation Associate Professor of Economics at Osaka University, and was Visiting Scholar and Visiting Assistant Professor of Economics at Stanford University and Foreign Visiting Scholar at the Bank of Japan. Sheard is a member of the World Economic Forum’s Global Future Council on the New Economic Agenda (2018-2019) and was a member of the WEF’s Global Agenda Council on the International Monetary System (2010-2012). He served on committees of the Japanese Government’s Economic Deliberation Council, as an appointee of Prime Minister Ryutaro Hashimoto (1997-98) and as an appointee of Prime Minister Keizo Obuchi (1998-1999), and was a member of the oversight board of the Japanese Government’s Research Institute of Economy, Trade and Industry (2001-2006).  From 2003 to 2010, he was a non-executive director of ORIX Corporation. In 2006, Sheard was recognized by Advance as one of a 100 Leading Global Australians. Sheard is on the board of the Foreign Policy Association and is a member of the Bretton Woods Committee, the Council on Foreign Relations, and the Economic Club of New York. He speaks regularly at conferences around the world, and his views on the global economy and policy issues are frequently cited in the international press. Author or editor of four books and numerous academic articles, Sheard’s 1997 book in Japanese, Mein Banku Shihon Shugi no Kiki: Biggu Ban de Kawaru Nihongata Keiei (The Crisis of Main Bank Capitalism: How Japanese-style Management Will Change with “Big Bang”), won the Suntory-Gakugei Prize in the Economics–Politics Division. Sheard received a BA (Hons) from Monash University and a Master of Economics and PhD in Japanese Economy from the ANU. Email: paul_sheard@hks.harvard.edu