["Journal of Money, Credit and Banking, EarlyView. ", "\nAbstract\nQuantitative easing (QE) introduced during the 2008 financial crisis, has since remained a key monetary policy tool. Our paper studies how QE affects market liquidity using unique data on Swedish government bonds. We find that there is a deterioration in the level of market liquidity from QE. This scarcity effect is nonlinear. Only after QE reaches a certain volume level, it outweighs the improvement in liquidity from boosting market demand. Unlike market prices, which often react to announcements, liquidity does not change when QE is announced. Instead, the liquidity effect occurs in connection with the actual purchases.\n"]