QE and Economic Growth

Last week Monday (i.e. September 19, 2011) the Bank of England claimed that "Quantitative Easing (QE) alleviated economic crisis" It is stated that " .... its first to measure the effect of QE on the economy, found it provided a "significant" aid to growth and helped GDP increase by between 1.5% and 2%. This was equivalent to dropping interest rates by between 1.5 and 3 percentage points .... "

This article remembered me another article which was published in Buttonwood of Economist on Jan 4, 2011 titled "Show me (the Effect of) the Money". This article states that "David Ranson of Wainwright Economics is a sceptic on this issue and has analysed the data over the period of 1950-2007. He has looked at monetary base growth rather than M2 or broader measures for one very good reason. It is clear that QE has had a much greater impact on the monetary base (doubling it in the autumn of 2008) than on other measures such as credit growth" (Note: The analysis is done on US Data)

It is further stated that "Ranson divided the 57 years period from 1950-2007 into two-years  when the monetary base grew at an above average rate (8.1%) and years below average growth (3.5%). Economics growth was higher (3.7%) in the years of slow money growth than it was in the years of rapid growth (3.2%). The same is true for industrial production. Even the stock market performed better in years of sluggish money growth". The Economist went on to claim that QE will not really help the economy. Now, Bank of England claims that QE helped their economy to move further. 

For some point of time QE was not in newspapers or aticles; but now they are back, thanks to the EURO debt crisis and Bank of England. Three days ago (i.e. 27.09.2011) in Economist again there was an article titled "Which region needs QE?", the article made comparisons on three economy's namely U.S. , England and euro area over the QE. It went on to say that euro area have slowest of the money growth.


After reading these three articles few questions raised in my mind 1. Do QE will really help the economy to move faster away from any crisis? 2. Why QE fails in U.S. when it can help the other economies? (I think probably due to poor banking managment) 3. Is there any direct relationship between QE, Inflation and Growth Rate? It's not easy to answer all these questions, but history and repeated economic events/crisis gives some near answers for these questions. (Leaving open ended for analysis)