What does quantitative easing mean for investors? Seven years after the global financial crisis struck, some central banks are still fire fighting. The ECB is the latest major central bank to opt for this emergency monetary measure.

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Central banks typically cut interest rates if they want to stimulate the economy. But along with most of its major counterparts, the ECB has already cut interest rates to virtually zero, yet growth is stagnant and demand so subdued that prices are falling. Central banks buy widely held assets whose prices tend to affect economic activity, such as bonds.

If it buys lots of bonds, their price will rise, causing their yields to fall. Bond yields act as long-term interest rates, so as they decline, businesses and households should be encouraged to borrow — or so economists hope. Buying bonds can also bolster the financial sector, a key priority after the global financial crisis.

Financial institutions hold many bonds, and lower interest rates reduce the cost of bank funding and raise the value of the bonds they hold. Propping up banks can encourage them to lend more and boost economic activity.

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QE also tends to lower the value of a currency, as its quantity in circulation increases and expectations for interest rate rises are put back. A lower currency stimulates exports and inflation. Finally, the printed money tends to find its way into asset markets, as many of those who receive cash from the central bank will try to grow it.

Buoyant asset markets can help lift overall confidence. Economists are still debating the impact of QE in the UK and US.

Many feel that while it may have prevented a nasty recession turning into a depression, it has had scant impact on growth. In the Eurozone, QE is likely to have even less of a positive effect on growth, for several reasons.

One problem is that simply making money available does not induce banks to lend much more or households and companies to borrow: After a financial crisis, firms and consumers are over-indebted and more inclined to work off their borrowings than rack up any more, while overextended banks are reluctant to lend.

And several years on from the crisis, European banks continue to look overextended. Demand is subdued in any case and European bond yields, or long-term interest rates, are already historically low; certainly considerably lower than in the US and UK when their QE programmes began. So there is little mileage in making loans cheaper. Arguably more important are structural reforms to bolster productivity and long-term growth, and an end to harsh austerity programmes, which have undermined demand.

QE could buy time for reforms and fiscal stimulus, but policymakers show little sign of getting their act together. The euro fell to an year low against the dollar, for instance, as investors anticipated the start of QE, and seems likely to remain under pressure now that the ECB has put its printed money where its mouth is.

They should be in line for a hefty earnings boost, just as Japanese companies have profited from the tumbling yen in recent years.

Furthermore, several countries have become much more competitive in recent years as austerity has reduced wages and prices. Combine this fall in the cost of doing business with a weaker currency, and the continent becomes an appealing proposition to foreign investors. There is, therefore, ample scope for earnings to rise quickly off depressed levels in Barclays expects earnings per share in continental Europe to expand by 9.

Political instability is a recurrent problem in the Eurozone, with populists gaining power in Greece and gaining strength in Spain. However, policymakers appear more confident that the single currency area has bolstered its defences in the past few years; there is now a Europe-wide rescue fund, for instance.

And the worst-case scenario of extreme instability amid a potential Greek exit would be likely to prompt even further central bank action to reassure investors, potentially resulting in additional money-printing.

The one consequence of QE we can rely on, recent history shows, is rising stock markets. Investors are keen to buy riskier assets with the printed cash in order to chase higher returns in a low-interest rate environment.

US bouts of QE have coincided neatly with upswings in the US stock market in the past few years. So the wall of money heading for Europe is another reason to expect the upward momentum in European equities to endure.

All this suggests that there could be considerable potential in the shares of large European companies. One way to gain exposure is through the Henderson European Focus fund , available on the Barclays Stockbrokers Funds Market and boasting a five-star FE crown rating: An exchange-traded fund is another possibility. The iShares MSCI Europe ex-UK UCITS ETF Epic: IEUX concentrates on large-cap continental firms.

Always remember that investments can fall in value as well as rise; you might get back less than you invest.

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Market Review What does quantitative easing mean for investors? In recent years, central banks have flooded stock markets with billions in freshly printed money in a bid to jump-start stricken economies. But the jury is out on the long-term impact of so-called quantitative easing. How is QE supposed to work? No silver bullet Economists are still debating the impact of QE in the UK and US. What to do next and how Barclays can help The one consequence of QE we can rely on, recent history shows, is rising stock markets.

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