Footnote:
In: Journal of Economic Dynamics and Control 37(10), pp. 2104-2122
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments December 28, 2012 erstellt
Description:
This paper investigates the effect of monetary policy on stock market bubbles and trading behavior in experimental asset markets. For this purpose, we introduce the possibility of investing in interest bearing bonds to the widely used laboratory asset market design of Smith, Suchanek, and Williams (1988). In a series of experiments treatment groups face a variable interest rate policy which depends on asset prices, while control groups are subjected to a constant interest rate. We observe a strong impact of our interest rate policy on liquidity in the stock market but only a small impact on bubbles. However, we find that announcing the possibility of reserve requirements significantly reduces bubbles even when such requirements are not imposed