What is the purpose of $C_E$ in this circuit?

I understand it acts like a filter for $$\R_E\$$, but what is the point? $$\R_E\$$ provides negative feedback to improve the bias stability. But this negative feedback will reduce the signal gain also. So a capacitor $$\C_E\$$ is applied in parallel so that only the DC component experiences the negative feedback and the AC signal is 'bypassed' via $$\C_E\$$

In DC analysis, capacitors are taken as open-circuit. In small signal low or medium frequency AC analysis, capacitors are taken as short-circuit.

So, as @nidhin explained, CE shorts RE in AC.

What does this bring? RE provides thermal stability so that the DC operation point (i.e. bias) does not change. Without CE, small signal voltage gain would be $$\A_V = -R_C / (r_e + R_E)\$$, where $$\r_e = 26mV/I_{C-bias}\$$. Since RE is shorted by a sufficiently large capacitor, CE, voltage gain will be $$\A_V = R_C/r_e\$$.

RESULTS:

• DC thermal stability remains.
• Voltage gain increased.
• Gain becomes transistor-dependent which we mostly don't want.