Macroeconomic effects of quantitative easing in the United States: New evidence between the global financial crisis and the COVID-19 periods

Abstract

This paper examines the impact of unconventional monetary policies, such as quantitative easing, on the U.S. unemployment rate during the financial crises and the Covid-19 pandemic. Most studies focus on the factors and monetary policies affecting unemployment during financial crises. Nevertheless, these policies may vary during health and social crises. In order to conduct our study, we used the ARDL (Autoregressive Distributed Lag) model, covering two distinct periods: from January 2007 to December 2018 for the first and from January 2019 to December 2022 for the second. The ARDL model is best suited for this study since it allows testing cointegration and estimating short- and long-term relationships when the series are not integrated of the same order. The study reveals that, during the Covid-19 period, the unemployment rate increases in the short and long term due to expansionary monetary policy. However, during financial crises, quantitative easing leads to a decrease in the unemployment rate over the same time horizons. The findings provide valuable insights into the effects of unconventional monetary policies and their influence on labour market reforms depending on the nature of the crisis.