When domestic and foreign QE overlap: evidence from Sweden

We estimate the effects of domestic and foreign quantitative easing (QE) programmes on a small open economy, Sweden, using a structural BVAR model. Domestic QE raised GDP, lowered unemployment and depreciated the currency, while effects on in ation are less clear. The ECB QE had large positive effects on both GDP and in ation in Sweden, also due to the endogenous response of domestic QE to the foreign one. In terms of transmission channels, domestic QE improved lending conditions for households and lowered expected future rates, while foreign QE improved financing conditions for firms.