Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/230498
Authors: 
Penalver, Adrian
Hanaki, Nobuyuki
Akiyama, Eizo
Funaki, Yukihiko
Year of Publication: 
2020
Series/Report no.: 
ISER Discussion Paper No. 1094
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.
Subjects: 
Quantitative easing
experimental asset market
expectation dynamics
JEL: 
C90
D84
Document Type: 
Working Paper

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