Policy Article

Extending QE: Additional risks for financial stability?

The ECB’s decision to extend its quantitative easing (QE) programme for another 9 months is not a game changer but grosso modo “more of the same for longer”. Thus, the time dimension plays a crucial role for assessing the risks of unintended side-effects of QE policies designed to stimulate the economy. We widen the view beyond the purely macroeconomic perspective and highlight the importance of the level of interest for the production structure (rather than the level of production) and the distortive consequences of artificially low interest rates. Based on theoretical deliberations linking distortions in the real economy to financial stability, empirical evidence is explored with respect to more aggressive maturity transformation, “zombification” and the eagerness to push through structural reforms and fiscal consolidation in times of easy access to financing by governments.