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Credit Constraint in General Equilibrium: Experimental Results

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Author Info

  • Bosch-Domenech, A.
  • Silvestre, J.

Abstract

Our work attempts to investigate the influence of credit tightness or expansion on activity and relative prices in a multimarket set-up. We report on some double- auction, two-market experiments where subjects had to satisfy an inequality involving the use of credit. The experiments display two regimes, characterized by high and low credit availability. The critical value of credit at the common boundary of the two regimes has a compelling interpretation as the maximal credit use at the Arrow-Debreu equilibrium of the abstract economy naturally associated to our experimental environment. Our main results are that changes in the availability of credit: (a): have minor and unsystematic effects on quantities and relative prices in the high-credit regime, (b): have substantial effects, both on quantities and relative prices, in the low-credit regime.

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Bibliographic Info

Paper provided by California Davis - Department of Economics in its series Department of Economics with number 95-07.

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Length: 30 pages
Date of creation: 1995
Date of revision:
Handle: RePEc:fth:caldec:95-07

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Postal: University of California Davis - Department of Economics. One Shields Ave., California 95616-8578
Phone: (530) 752-0741
Fax: (530) 752-9382
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Web page: http://www.econ.ucdavis.edu/
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Related research

Keywords: AUCTIONS ; GENERAL EQUILIBRIUM ; CREDIT;

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References

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  1. Xavier Calsamiglia & Alan Kirman, 1991. "A unique informationally efficient and decentralized mechanism with fair outcomes," Economics Working Papers 7, Department of Economics and Business, Universitat Pompeu Fabra.
  2. Walter Garcia-Fontes & Hugo Hopenhayn, 2000. "Entry restrictions and the determination of quality," Spanish Economic Review, Springer, vol. 2(2), pages 105-127.
  3. Juan P. Nicolini, 1993. "More on the time inconsistency of optimal monetary policy," Economics Working Papers 56, Department of Economics and Business, Universitat Pompeu Fabra.
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Cited by:
  1. Roberto Ricciuti, 2004. "Bringing Macroeconomics into the Lab," ICER Working Papers 26-2004, ICER - International Centre for Economic Research.
  2. Arno Riedl & Frans van Winden, 0000. "An Experimental Investigation of Wage Taxation and Unemployment in Closed and Open Economies," Tinbergen Institute Discussion Papers 00-112/1, Tinbergen Institute.
  3. Steven Gjerstad & Jason M. Shachat, 2007. "Individual Rationality and Market Efficiency," Purdue University Economics Working Papers 1204, Purdue University, Department of Economics.
  4. John Hey & Daniela Cagno, 1998. "Sequential Markets: An Experimental Investigation of Clower's Dual-Decision Hypothesis," Experimental Economics, Springer, vol. 1(1), pages 63-85, June.
  5. Shachat, Jason & Zhang, Zhenxuan, 2012. "The Hayek hypothesis and long run competitive equilibrium: an experimental investigation," MPRA Paper 39579, University Library of Munich, Germany.

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