Last month — just a few days before the European Central Bank announced its intention to initiate quantitative easing (QE) — I attended a seminar in Geneva with journalists, policymakers and investors. The discussions there, much like those in Japan before Prime Minister Shinzo Abe launched his groundbreaking economic-reform strategy in 2012, reflected an inadequate understanding of unconventional monetary policy's transformative potential.
Indeed, at the seminar, European economists and journalists — especially the Germans, and even some of the Britons in the room — adopted a dismissive tone. "Monetary policy's power is limited, particularly when the interest rate is so low," some said. "We cannot count on accommodative monetary policy to spur a portfolio reshuffling," others added.
These statements were all too familiar — and somewhat surprising, given the progress that Japan's ongoing QE-based strategy has enabled the country to make. Clearly, many in Europe lack an understanding of the history and significance of "Abenomics"; but such an understanding should inform their monetary policy debates.
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