When economic downturns push policy interest rates down to the Zero Lower Bound (ZLB), traditional interest rate cuts lose their effectiveness. Central banks shift to unconventional instruments, specifically Quantitative Easing (QE).
The Four Primary Transmission Channels of QE
  QE Policy Channel   |   Primary Operational Mechanic   |   Economic Output Effect
----------------------+----------------------------------+-----------------------------------------
  1. Portfolio Balance| Purchases long-term state bonds  | Lowers long yields; drives stock demand
  2. Signaling Channel| Commits to lower future rates    | Anchors market rate expectations low
  3. Bank Lending     | Floods reserves into accounts    | Lowers bank funding costs; fuels credit
  4. Wealth Effect    | Raises general asset valuations  | Boosts corporate and household spending

Through large-scale asset purchases, the central bank works to lower long-term borrowing costs, support financial asset prices, and stimulate commercial credit flows to revive economic growth. [1]
 
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