• About Us
      Asia’s 1 st LEED Platinum Rated Campus

      Asia’s 1st LEED Platinum Rated Campus

      About Us

      • Chairman's Message
      • Vice Chairman & CEO
      • Dean's Message
      • Governing Council
      • Business Advisory Council
      • Academic Advisory Council
      • Work With Us
      • Mandatory Disclosure
      • Anti-Ragging Notice

      TERM ZERO

      Media

      • News
      • Events
      • In Media
      • Media Kit

      Rankings

      Accreditations

      NIRF

      Campus

      Blog

      Annual Events

      • Convocation
      • TEDxGLIMChennai
      • L'Attitude
      • Digital Symposium
      • Sangamitra
      • Annual Alumni Meet
      • SWIM
      • IEC
      • Human Capital Management
  • Programs
      Transform and Lead

      Transform and Lead

      Full Time Programs

      PGPM

      One Year MBA for professionals with work experience

      Learn More Apply Now

      PGDM

      Two Year MBA for professionals with 0-2 years of work experience

      Learn More Apply Now

      EXECUTIVE EDUCATION

      Partner with us for customized learning solutions for your organisation

      Learn More

      Corporate Programs

      PGXPM

      Executive program for Mid & Senior Level working professionals

      Learn More Apply Now APP. Deadline: 30th August, 2020

      PGPM Flex

      Weekend management program for young working professionals

      Learn More Apply Now APP. Deadline: 30th August, 2020

      MBA in Business Analytics

      Family Enterprises Management

  • Faculty & Research
      Ranked 6th

      Ranked 6 th

      by NIRF ranking in teaching and learning among all B-Schools in the country

      Faculty

      • Full Time Faculty
      • Visiting Faculty
      • Adjunct Faculty

      Research

      • Faculty Editors
      • Papers & Journal Publications
      • Case Studies & Books
      • Conference Proceedings

      Centers of Excellence

      • Centre For Excellence in Retail Management
      • Great Lakes Centre For Management Research
      • Kotler - Srinivasan Centre for Research in Marketing
      • Centre for Excellence in Business Analytics and Business Intelligence
      • CET
      • Union Bank Centre for Banking Excellence

      Conferences

      • NASMEI
      • Financial Conference
  • Recruiters & Companies

      “Great Location for Talent. We are happy to continue visiting and having budding professionals join us and grow their careers.”

      Anil Visal

      Partner - Deloitte India

      Campus Recruitment

      • Recruitment Process
      • PGDM Class Profile 2018-20
      • PGPM Class Profile 2019-20
      • Past Recuiters
      • Student Achievements
      • Recruiters Speak

      Internships

      • Recruitment Process
      • PGDM Class Profile 2019-21
      • Live Projects

      Placement Reports

      • PGPM
      • PGDM
      • Internship Report

      Leadership Series

      • Titans Speak
      • Industry Lecture Series
      • Thought Leader Series

      Talent Listings

  • Alumni

EUROZONE AND QUANTITATIVE EASING: WILL MARIO DRAGHI GET THE SUPPORT? – BY Dr. BOBBY SRINIVASAN AND Dr. SUDHAKAR BALACHANDRAN

December 12, 2014 | Posted by bobbysrinivasan << back to blog

The Eurozone Central bank chief, Mario Draghi, made a commitment a couple of years ago that he would do whatever is necessary to save the euro. Since he dropped the interest rate a few months back, from a meagre 0.15% to 0.05%, the currency market went berserk and pushed the euro from a level of 1.37 to 1.24, a drop of nearly 10% against the dollar. Mr. Draghi , realizing that in the quarter the Eurozone economy grew a meagre 0.2% wanted to start quantitative easing  (QE). By the way QE involves the Central Bank buying all sorts of financial instruments right from the government bonds, good quality corporate bonds. The quantum of purchase of these bonds will be announced and hopefully will be transparent. Mr. Draghi talks of returning the ECB balance sheet to its size in early 2012 which implies buying 1 trillion euro worth of bonds.

This, of course, is a shift from the usual, namely, keep pushing the interest rates lower to revive the economy. The Eurozone interest rate is already near zero. But Draghi is facing stiff opposition. Jans Weidmann, the German Bundes Bank President doubts whether this will work. Setting a target to purchase sovereign debt, he believes will not be easy. The questions raised are:

  1. Which country’s bond will he buy?
  2. Will he buy the already existing bond or the newly issued one?
  3. What should be the rating of these bonds?
  4. Can he buy junk bonds?

Mr. Draghi faces this daunting task. He has to push up the inflation to positive territory. He should also achieve growth. Once committed to QE, he should not hesitate as delay in a deflationary environment is quite dangerous. Look at Japan, its economy is in stagnation for nearly 2 decades.

Mr. Draghi can learn some lessons both from Britain and the US. For example, the US adapted QE after the sub-prime crisis of 2008. Before the country was losing around 700,000 jobs every month. Currently, they are creating atleast 200,000 jobs every month. If Draghi had to implement the QE, it is suggested that he should be buying more asset backed securities and corporate bonds. It is these corporations, who are otherwise profitable except the liquidity problem, who should be financed as they are only capable of returning the borrowed money.

In summary, in quantitative easing, the central bank should ensure that all the assets they are purchasing are capable of returning the funds that they had borrowed with interest.

<< back to blog

Programs

PGPM - One Year MBA for professionals with 2+ years work experience

Learn More >

PGDM - Two Year MBA for graduates with 0-2 years work experience

Learn More >

Events

Union Bank Finance Conference
Dec 17, 2020

Networking with Champions
Nov 08, 2020

Harry Kraemer on Performance with A Purpose
Oct 08, 2020
Read more

Successful Women in Management (SWIM) Lecture Series
July 05, 2020
Read more

The Great Circle Alumni Talk Series
July 04, 2020
Read more

  • About Us
  • Programs
  • Faculty & Research
  • Recruiters & Companies
  • Alumni
  • Blog
  • Contact Us