Drying paint or boiling water? The effects of QT revisited

Plus, Australia’s net capital exports

RBA Assistant Governor Chris Kent recently told parliament that the effects of quantitative tightening would be as exciting as watching paint dry (channeling Janet Yellen’s June 2017 FOMC press conference) or grass grow, while RBA Governor Michelle Bullock has characterised those effects as ‘marginal.’ A new cross-country study of QT (FT op-ed version here) finds that it ‘has had more of an impact than “paint drying”, but far less than simply reversing the effects of quantitative easing.’ The results are not inconsistent with Bullock’s ‘marginal’ characterisation, but as it happens, the largest impact from the QT programs observed internationally to date is in Australia.