A Quantitative Easing Experiment

ISER DP No. 1094, 2020

75 Pages Posted: 17 Sep 2020

See all articles by Adrian Penalver

Adrian Penalver

Banque de France

Nobuyuki Hanaki

Osaka University - Institute of Social and Economic Research

Eizo Akiyama

University of Tsukuba - Department of Social Systems and Management

Yukihiko Funaki

Waseda University, School of Political Science and Economics

Ryuichiro Ishikawa

Waseda University-SILS

Multiple version iconThere are 3 versions of this paper

Date Written: July 4, 2020

Abstract

We experimentally investigate the effect of a central bank buying bonds for cash in a quantitative easing (QE) operation. In our experiment, the bonds are perfect substitutes for cash and have a constant fundamental value which is not affected by QE in the rational expectations equilibrium. We find that QE raises bond prices above those in the benchmark treatment without QE. Subjects in the benchmark treatment learned to trade the bonds at their fundamental value but those in treatments with QE became more convinced after repeated exposure to the same treatment that QE boosts bond prices. This suggests the possibility of a behavioural channel for the observed effects of actual QE operations on bond yields.

Keywords: quantitative easing, experimental asset market, expectation dynamics

JEL Classification: C90, D84

Suggested Citation

Penalver, Adrian and Hanaki, Nobuyuki and Akiyama, Eizo and Funaki, Yukihiko and Ishikawa, Ryuichiro, A Quantitative Easing Experiment (July 4, 2020). ISER DP No. 1094, 2020, Available at SSRN: https://ssrn.com/abstract=3667362 or http://dx.doi.org/10.2139/ssrn.3667362

Adrian Penalver

Banque de France ( email )

Paris
France

Nobuyuki Hanaki (Contact Author)

Osaka University - Institute of Social and Economic Research ( email )

6-1, Mihogaoka
Suita, Osaka 567-0047
Japan

Eizo Akiyama

University of Tsukuba - Department of Social Systems and Management ( email )

Japan

Yukihiko Funaki

Waseda University, School of Political Science and Economics ( email )

1-6-1 Nishi-Waseda
Shinjuku-ku, Tokyo 169-8050, Tokyo 169-8050
Japan

Ryuichiro Ishikawa

Waseda University-SILS ( email )

Shinjuku, Tokyo 1658050
Japan

HOME PAGE: http://www.f.waseda.jp/r.ishikawa/

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
8
Abstract Views
153
PlumX Metrics