Quantitative Easing and Monetary Policy Legitimate Perspective

Many economists, monetary policy makers and bankers view interest rates as an efficient tool for allocating funds, evaluating the efficiency of projects, and measuring financing costs, and that they are the main indicator of many economic variables and phenomena. Other variables, and enables those authorities to implement the monetary policy desired by them. This has led to an important fact, which is that interest rates have lost their effectiveness as a tool for resource allocation or as an influence on economic, credit and monetary policies, and then central banks resorted to new and unconventional tools and forms of monetary policy with the aim of pumping additional liquidity into the banking system or stimulating economic activity. These unconventional policies are the quantitative easing policy that is called quantitative easing sometimes or credit easing at other times, which is based on the central bank’s resort to buying troubled assets that caused a lack of liquidity in commercial banks, or buying assets and government securities from those banks in order to enable them to Adjusting its liquidity position and resuming its lending activity.