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Submitted by Leo F. on
Dear Shanta, I thank you for this helpful overview of relevant implications of QE2 for Africa. However, I want to make one objection regarding point 3. QE2 is not likely to lead to lower interest rates in the US, let alone higher capital inflows to SSA. The reason is quite obvious: US interest rates are already near zero. In a strict sense, the term 'QE' per definition refers to the extension of the FED's balance sheet, only if there is a situation where monetary policy has no significant effect on interest rates. In any other situation, we would not use the term 'QE', but rather refer to it as ‘business as usual’ (= open market operations). Therefore, the interest rate issue is a rather unimportant concern for SSA in the context of QE2. In contrast, I totally agree with your worries about the adverse effects of a 'currency war'.