TY - JOUR
T1 - A quantitative easing experiment
AU - Penalver, Adrian
AU - Hanaki, Nobuyuki
AU - Akiyama, Eizo
AU - Funaki, Yukihiko
AU - Ishikawa, Ryuichiro
N1 - Funding Information:
This is a major revision, with a completely new set of experiments, of our Banque de France Working Paper No. 651 with the same title. This research was partly funded by JSPS Kakenhi (18K19954), ANR ORA-Plus project “BEAM” (Behavioral and Experimental Analyses in Macro-Finance, ANR-15-ORAR-0004) as well as by the French government-managed l’Agence Nationale de la Recherche under Investissements d’Avenir UCA JEDI (ANR-15-IDEX-01). In particular, we thank the UCAinACTION project. This paper has benefited from comments received from the associate editor and reviewers, at the SEF conference in Nice, the CEF conference in New York, the Stony Brook Experimental Macroeconomics workshop, ASSA 2019 in Atlanta, seminars at the Banque de France, UC Irvine, Cambridge, Paris School of Economics, and CREST. We are particularly grateful for the discussion comments of Marianne Andries, John Duffy, Cars Hommes, and Paul-Pezanis Christou. We also thank Dr Amanda Fitzgibbons of Edanz Group ( www.edanzediting.com/ac ) for editing a draft of this manuscript. The experiments reported in this paper have been approved by the Ethics Review Committee on Research with Human Subjects of Waseda University (No. 2015-334). The views in this paper reflect those of the authors and do not necessarily reflect the views of the Banque de France or the Eurosystem.
Funding Information:
This is a major revision, with a completely new set of experiments, of our Banque de France Working Paper No. 651 with the same title. This research was partly funded by JSPS Kakenhi (18K19954), ANR ORA-Plus project “BEAM” (Behavioral and Experimental Analyses in Macro-Finance, ANR-15-ORAR-0004) as well as by the French government-managed l'Agence Nationale de la Recherche under Investissements d'Avenir UCAJEDI (ANR-15-IDEX-01). In particular, we thank the UCAinACTION project. This paper has benefited from comments received from the associate editor and reviewers, at the SEF conference in Nice, the CEF conference in New York, the Stony Brook Experimental Macroeconomics workshop, ASSA 2019 in Atlanta, seminars at the Banque de France, UC Irvine, Cambridge, Paris School of Economics, and CREST. We are particularly grateful for the discussion comments of Marianne Andries, John Duffy, Cars Hommes, and Paul-Pezanis Christou. We also thank Dr Amanda Fitzgibbons of Edanz Group (www.edanzediting.com/ac) for editing a draft of this manuscript. The experiments reported in this paper have been approved by the Ethics Review Committee on Research with Human Subjects of Waseda University (No. 2015-334). The views in this paper reflect those of the authors and do not necessarily reflect the views of the Banque de France or the Eurosystem.
Publisher Copyright:
© 2020 Elsevier B.V.
PY - 2020/10
Y1 - 2020/10
N2 - 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.
AB - 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.
KW - Expectation dynamics
KW - Experimental asset market
KW - Quantitative easing
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U2 - 10.1016/j.jedc.2020.103978
DO - 10.1016/j.jedc.2020.103978
M3 - Article
AN - SCOPUS:85090358965
SN - 0165-1889
VL - 119
JO - Journal of Economic Dynamics and Control
JF - Journal of Economic Dynamics and Control
M1 - 103978
ER -