Here's the conclusion to a FRBSF Economic Letter from Vasco Cúrdia and Andrea Ferrero on the question of How Stimulatory Are Large-Scale Asset Purchases?:
... Asset purchase programs like QE2 appear to have, at best, moderate effects on economic growth and inflation. Research suggests that the key reason these effects are limited is that bond market segmentation is small. Moreover, the magnitude of LSAP effects depends greatly on expectations for interest rate policy, but those effects are weaker and more uncertain than conventional interest rate policy. This suggests that communication about the beginning of federal funds rate increases will have stronger effects than guidance about the end of asset purchases.
The Fed could sure use some help from fiscal policy (instead, we appear to be headed for yet another manufactured crisis over the debt). As Paul Krugman notes today, the fiscal policy measures that we did take were relatively meager, and for too short-lived:
Too Little, Gone Too Soon: One of the things you always heard, back when we were actually talking about stimulus rather than fighting a rearguard action against destructive austerity, was the claim that stimulus spending would inevitably end up becoming a permanent fixture of the economy. This was always said with an air of worldly wisdom — of course that’s how these things work! — even though history said very much the opposite.
But anyway, the invaluable FRED now has a series on exactly that subject, and here’s what it looks like ... calculated as a percentage of the CBO estimate of potential GDP:
Stimulus as percent of potential GDP
So next time someone goes on about how we had this huge stimulus that failed, you can tell him that the “huge” stimulus — in response to the worst financial crisis in three generations — peaked at a whopping 1.6 percent of GDP, and was effectively gone in a bit over two years.