Quantitative easing, a term first widely used in Japan in the 1990s, does not have an agreed precise definition. It describes a policy in which the central bank buys assets from the financial sector, and does not necessarily – as in conventional monetary policy – confine such activities to the management of the government’s own debt.

Though this policy had been pursued by Tokyo with little success, the US Federal Reserve, Bank of England and European Central Bank all adopted QE after the financial crisis of 2008. Amid all that has been written on this subject, there is very little about how it is supposed to work, or whether it has in fact worked.

When I was a student, I learnt that if there was a plentiful supply of liquidity to the banking system, there would be easy credit for businesses and households, which would encourage them to spend more. It was never clear that this mechanism worked well in recessions: nervous businesses and households might be reluctant to spend and invest, however much liquidity was available to them. The connection between lax monetary policy and inflation when the economy was overheated was much clearer than the connection between loose monetary policy and growth when the economy was depressed.