An Experimental Analysis of the Effect of Quantitative Easing

34 Pages Posted: 12 Jun 2018

See all articles by Adrian Penalver

Adrian Penalver

Banque de France

Nobuyuki Hanaki

Université de Nice Sophia Antipolis - Groupe de Recherche en Droit, Economie et Gestion (GREDEG)

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

Date Written: June 11, 2018

Abstract

In this paper we report the results of a repeated experiment in which a central bank buys bonds for cash in a quantitative easing (QE) operation in an otherwise standard asset market setting. The experiment is designed so that bonds have a constant fundamental value which is not affected by QE under rational expectations. By repeating the same experience three times, we investigate whether participants learn that prices should not rise above the fundamental price in the presence of QE (as found in (Penalver et al., 2017)). We find that some groups do learn this but most do not, instead becoming more convinced that QE boosts bond prices. These claims are based on significantly different behaviour of two treatment groups relative to a control group that doesn't have QE.

Keywords: Quantitative Easing, Experimental Asset Markets

JEL Classification: C90, D84, G21

Suggested Citation

Penalver, Adrian and Hanaki, Nobuyuki and Akiyama, Eizo and Funaki, Yukihiko and Ishikawa, Ryuichiro, An Experimental Analysis of the Effect of Quantitative Easing (June 11, 2018). Banque de France Working Paper No. 684. Available at SSRN: https://ssrn.com/abstract=3194093 or http://dx.doi.org/10.2139/ssrn.3194093

Adrian Penalver (Contact Author)

Banque de France ( email )

Paris
France

Nobuyuki Hanaki

Université de Nice Sophia Antipolis - Groupe de Recherche en Droit, Economie et Gestion (GREDEG) ( email )

250, rue Albert Einstein
Valbonne, 06560
France

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/

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