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A quantitative easing experiment

Adrian Penalver (), Nobuyuki Hanaki, Eizo Akiyama and Yukihiko Funaki

ISER Discussion Paper from Institute of Social and Economic Research, Osaka University

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.

Date: 2020-07
New Economics Papers: this item is included in nep-cba, nep-exp and nep-mon
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https://www.iser.osaka-u.ac.jp/library/dp/2020/DP1094.pdf

Related works:
Working Paper: A Quantitative Easing Experiment (2018) Downloads
Working Paper: A Quantitative Easing Experiment (2017) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:dpr:wpaper:1094

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