EconPapers    
Economics at your fingertips  
 

Central Bank Balance Sheet Policies Without Rational Expectations

Luigi Iovino and Dmitriy Sergeyev

No 13100, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We study the effects of central bank balance sheet policies-namely, quantitative easing and foreign exchange interventions-in a model where people form expectations through the level-k thinking process, which is consistent with experimental evidence on the behavior of people in strategic environments. We emphasize two main theoretical results. First, under a broad set of conditions, central bank interventions are effective under level-k thinking, while they are neutral in the rational expectations equilibrium. Second, forecast errors about future endogenous variables are predictable by balance sheet interventions. We confirm these predictions using data on mortgage purchases by US government sponsored enterprises.

New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
Date: 2018-08
References: View references in EconPapers View complete reference list from CitEc
Citations View citations in EconPapers (2) Track citations by RSS feed

Downloads: (external link)
http://www.cepr.org/active/publications/discussion_papers/dp.php?dpno=13100 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:13100

Ordering information: This working paper can be ordered from
http://www.cepr.org/ ... rs/dp.php?dpno=13100

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().

 
Page updated 2019-01-12
Handle: RePEc:cpr:ceprdp:13100