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A Quantitative Easing Experiment

Author

Listed:
  • A. Penalver
  • N. Hanaki
  • E. Akiyama
  • Y. Funaki
  • R. Ishikawa

Abstract

This paper presents experimental evidence that quantitative easing can be effective in raising bond prices even if bonds and cash are perfect substitutes and the path of interest rates is fixed. Despite knowing the fundamental value of bonds, participants in the experiment believed that bond prices would exceed this value when they knew that a central bank would buy a large fraction of the market in a quantitative easing operation. By contrast, there was no average deviation of prices from fundamentals when trading only occurred between participants themselves.

Suggested Citation

  • A. Penalver & N. Hanaki & E. Akiyama & Y. Funaki & R. Ishikawa, 2017. "A Quantitative Easing Experiment," Working papers 651, Banque de France.
    • Handle: RePEc:bfr:banfra:651
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    Cited by:

    1. Jieyi Duan & Nobuyuki Hanaki, 2021. "The impact of asset purchases in an experimental market with consumption smoothing motives," ISER Discussion Paper 1147r, Institute of Social and Economic Research, Osaka University, revised Sep 2022.
    2. Penalver, Adrian & Hanaki, Nobuyuki & Akiyama, Eizo & Funaki, Yukihiko & Ishikawa, Ryuichiro, 2020. "A quantitative easing experiment," Journal of Economic Dynamics and Control, Elsevier, vol. 119(C).
    3. Adrian Penalver, Nobuyuki Hanaki, Eizo Akiyama, Yukihiko Funaki, Ryuichiro Ishikawa, 2018. "An Experimental Analysis Of The Effect Of Quantitative Easing," Working papers 684, Banque de France.
    4. Jieyi Duan & Nobuyuki Hanaki, 2021. "The impact of asset purchases in an experimental market with consumption smoothing motives," ISER Discussion Paper 1147, Institute of Social and Economic Research, Osaka University.
    5. Duffy, John & Rabanal, Jean Paul & Rud, Olga A., 2023. "Market reactions to stock splits: Experimental evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 214(C), pages 325-345.
    6. John Duffy, 2022. "Why macroeconomics needs experimental evidence," The Japanese Economic Review, Springer, vol. 73(1), pages 5-29, January.

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    More about this item

    Keywords

    Quantitative Easing; Experimental asset markets.;

    JEL classification:

    • C90 - Mathematical and Quantitative Methods - - Design of Experiments - - - General
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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