A Classroom Inflation Uncertainty Experiment
This classroom experiment uses a double oral auction credit market to demonstrate how inflation uncertainty causes a wealth transfer between borrowers and lenders. The experiment also shows the social cost of inflation uncertainty when borrowers and lenders cannot agree on a nominal interest rate that compensates each for their risk. In this case, the credit market fails to allocate funds to the highest-valued investment projects. The experiment provides hands-on experience with the effects of anticipated and unanticipated inflation, giving students a common background for a discussion of the economic costs of inflation. It can be used in principles, intermediate macroeconomics, money and banking, or financial economics courses, with 860 students. It takes approximately 50 minutes to run and requires no computers.
Volume (Year): 7 (2008)
Issue (Month): 1 ()
|Contact details of provider:|| Postal: |
Fax: +44(0)117 331 4396
Web page: http://www.economicsnetwork.ac.uk/iree
|Order Information:|| Email: |
When requesting a correction, please mention this item's handle: RePEc:che:ireepp:v:7:y:2008:i:1:p:47-61. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Martin Poulter)
If references are entirely missing, you can add them using this form.