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A Quantitative Easing Experiment

Author

Listed:
  • Adrian Penalver

    (Banque de France)

  • Nobuyuki Hanaki

    (Université Côte d'Azur
    CNRS, GREDEG
    IUF)

  • Eizo Akiyama

    (University of Tsukuba, Japan)

  • Yukihiko Funaki

    (Waseda University, Japan)

  • Ryuichiro Ishikawa

    (University of Tsukuba)

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 substitute for cash, and have a constant fundamental value (FV) which is not affected by QE in the rational expectations equilibrium. We found that QE raised the bond prices beyond those in the benchmark treatment without QE and these differences became larger as subjects gained experience. While subjects in the benchmark treatment learned to trade the bonds at its FV, those in treatments with QE became more convinced that QE boosts bond prices.

Suggested Citation

  • Adrian Penalver & Nobuyuki Hanaki & Eizo Akiyama & Yukihiko Funaki & Ryuichiro Ishikawa, 2018. "A Quantitative Easing Experiment," GREDEG Working Papers 2018-10, Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), University of Nice Sophia Antipolis.
  • Handle: RePEc:gre:wpaper:2018-10
    as

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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Quantitative easing; experimental asset market; expectation dynamics JEL Code: C90; D84;

    JEL classification:

    • C90 - Mathematical and Quantitative Methods - - Design of Experiments - - - General
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations

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