Glossary

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Technical terms, unfortunately, cannot always be avoided – particularly when it comes to complex topics such as monetary policy. This is why we have compiled a glossary with a wide range of terms, arranged in alphabetical order and each with a short explanation.

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  • Quantitative easing is a monetary policy tool that is used to drive down long-term interest rates and to inject additional liquidity into the banking system. To achieve this, the central bank purchases large volumes of bonds, particularly long-dated sovereign bonds. This tends to push up bond prices and lower the corresponding yields – which in turn influences the general level of interest on the bond market. Central banks particularly engage in quantitative easing when short-term interest rates are already close to zero. The purchase of bonds creates central bank money, increasing the supply (quantity) of money, hence the term quantitative easing (as opposed to monetary policy easing by cutting policy rates).

  • Quantitative tightening (QT) means the reduction of bonds in portfolios held for monetary policy reasons, which were initially bought to perform a quantitative easing strategy. QT causes the money supply to contract and the central bank’s balance sheet to shrink, as there are reductions in both the number of bonds on the assets side as well as the liabilities to banks (banks’ balances on central bank accounts) on the liabilities side.

  • The quantity theory of money is the theory that there is a causal connection between the money supply and the price level. It is based on the equation of exchange, which states that the amount of money in circulation in a given period of time is equal to the level of prices of goods and services sold. Money supply (M) x velocity of circulation of money (V) = price level (P) x volume of transactions of goods and services (T) (M•V = P•T)

  • A quick tender is the tender procedure used by the Eurosystem to supply commercial banks with central bank money at short notice. Quick tenders are executed within just a few hours (announcement, submission of bids, allotment, settlement). By providing central bank money at short notice, the Eurosystem can rapidly impact the situation in the money market. Quick tenders can be carried out as variable or fixed rate tenders. However, in the Eurosystem they are used only on an ad hoc basis and in exceptional circumstances. Usually, refinancing operations are executed using standard tenders.

  • The International Monetary Fund (IMF) calculates the quota shares of its member states according to a complex procedure that is subject to occasional changes as a result of political decisions. A member state's quota corresponds to and determines its share of the Fund's voting rights as well as its participation in the Fund's capital. Germany's quota is currently 5.6%.