The distortionary effect of monetary policy: credit expansion vs. lump-sum transfers in the lab

Romain Baeriswyl and Camille Cornand

The B.E. Journal of Macroeconomics, 2018, vol. 18, issue 2, 30

Abstract: In an experimental monetary general equilibrium economy, we assess two processes of monetary injection: credit expansion vs. lump-sum monetary transfers. In theory, both processes are neutral and exert no real effect on allocation. In the experiment, however, credit expansion leads to substantial distortions of real allocation and relative prices, and exerts a redistributive effect across subjects. By contrast, an increase in money through lump-sum transfers does not distort real allocation.

Keywords: laboratory experiment; money neutrality; credit expansion; lump-sum monetary transfers (search for similar items in EconPapers)
JEL-codes: C92 E52 E58 (search for similar items in EconPapers)
Date: 2018
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Related works:
Working Paper: The distortionary effect of monetary policy: credit expansion vs. lump-sum transfers in the lab (2018)
Working Paper: The distortionary effect of monetary policy: credit expansion vs. lump-sum transfers in the lab (2015)
Working Paper: The distortionary effect of monetary policy: credit expansion vs. lump-sum transfers in the lab (2015)
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DOI: 10.1515/bejm-2017-0037

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