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Only Paul Could Go To Changchun

A Quantitative Easing Experiment

1/10/2018

 
Here.

This paper presents experimental evidence that quantitative easing can be effective in raising bond prices even if bonds and cash are perfect substitutes and the path of interest rates is fixed. Despite knowing the fundamental value of bonds, participants in the experiment believed that bond prices would exceed this value when they knew that a central bank would buy a large fraction of the market in a quantitative easing operation. By contrast, there was no average deviation of prices from fundamentals when trading only occurred between participants themselves.

From:

Adrian Penalver
Banque de France

Nobuyuki Hanaki
Université Nice Sophia Antipolis

Eizo Akiyama
University of Tsukuba

Yukihiko Funaki
Ryuichiro Ishikawa5
University of Waseda

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