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this chapter discusses the empirical analysis of money and credit undertaken at the Bank of england during the financial crisis and how it is used. an aggregate structural vector autoregression sVar including money is employed to analyse the impact of quantitative easing (Qe), as a crosscheck on other approaches focussing on the impact on financial market prices. Sectoral models of money and credit are used to assess the impact of the crisis and the associated shock to credit conditions. the contraction in the supply of credit to each sector can explain a substantial proportion of the shortfall in GDp relative to its pre-crisis trend. the shocks can also explain a large part of the fall in credit and much of the contraction in the customer funding gap.

This paper describes a sectoral empirical model of money and credit in the UK that can be used for analysing unconventional monetary policies that affect banks' balance sheets. The paper uses the model to assess the impact of QE on the UK economy focussing on the endogenous portfolio response of banks, financial companies and non-financial companies. The baseline results support the quantitative estimates found by other studies, but suggest the impact of QE is sensitive to the assumption about whether and to what extent QE affects bank lending.