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Credit constraints in general equilibrium: Experimental results

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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 Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 105.

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Date of creation: Oct 1996
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Handle: RePEc:upf:upfgen:105

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Web page: http://www.econ.upf.edu/

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Keywords: Experimental; auctions; credit; general equilibrium; Leex;

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References

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  1. Calsamiglia, Xavier & Kirman, Alan, 1993. "A Unique Informationally Efficient and Decentralized Mechanism with Fair Outcomes," Econometrica, Econometric Society, vol. 61(5), pages 1147-72, September.
  2. 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.
  3. Walter Garcia Fontes & Hugo Hopenhayn, 1992. "Entry restrictions and the determination of quality," Economics Working Papers 10, Department of Economics and Business, Universitat Pompeu Fabra.
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Cited by:
  1. Roberto Ricciuti, 2005. "Bringing Macroeconomics into the Lab," Labsi Experimental Economics Laboratory University of Siena 004, University of Siena.
  2. Shachat, Jason & Zhang, Zhenxuan, 2012. "The Hayek hypothesis and long run competitive equilibrium: an experimental investigation," MPRA Paper 39579, University Library of Munich, Germany.
  3. Riedl, Arno & van Winden, Frans, 2007. "An experimental investigation of wage taxation and unemployment in closed and open economies," European Economic Review, Elsevier, vol. 51(4), pages 871-900, May.
  4. Steven Gjerstad & Jason M. Shachat, 2007. "Individual Rationality and Market Efficiency," Purdue University Economics Working Papers 1204, Purdue University, Department of Economics.
  5. 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.

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