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Credit Constraints in General Equilibrium: Experimental Results

Author

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  • Bosch-Domenech, Antoni
  • Silvestre, Joaquim

Abstract

The authors' work attempts to investigate the influence of credit tightness or expansion on activity and relative prices in a multimarket set-up. They report on some double-action, 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 authors' main results are that changes in the availability of credit: (1) have minor and unsystematic effects on quantities and relative prices in the high-credit regime; and (2) have substantial effects, both on quantities and relative prices, in the low-credit regime. Copyright 1997 by Royal Economic Society.

Suggested Citation

  • Bosch-Domenech, Antoni & Silvestre, Joaquim, 1997. "Credit Constraints in General Equilibrium: Experimental Results," Economic Journal, Royal Economic Society, vol. 107(444), pages 1445-1464, September.
    • Handle: RePEc:ecj:econjl:v:107:y:1997:i:444:p:1445-64
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    Cited by:

    1. Baeriswyl Romain & Cornand Camille, 2018. "The distortionary effect of monetary policy: credit expansion vs. lump-sum transfers in the lab," The B.E. Journal of Macroeconomics, De Gruyter, vol. 18(2), pages 1-30, June.
    2. Sean Crockett, 2013. "Price Dynamics In General Equilibrium Experiments," Journal of Economic Surveys, Wiley Blackwell, vol. 27(3), pages 421-438, July.
    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. Luba Petersen & Guidon Fenig, 2015. "Distributing scarce jobs and output: Experimental evidence on the effects of rationing," Discussion Papers dp15-02, Department of Economics, Simon Fraser University.
    5. Camille Cornand & Frank Heinemann, 2014. "Experiments on Monetary Policy and Central Banking," Research in Experimental Economics, in: Experiments in Macroeconomics, volume 17, pages 167-227, Emerald Group Publishing Limited.
    6. John Hey & Daniela Cagno, 1998. "Sequential Markets: An Experimental Investigation of Clower's Dual-Decision Hypothesis," Experimental Economics, Springer;Economic Science Association, vol. 1(1), pages 63-85, June.
    7. Steven Gjerstad & Jason M. Shachat, 2007. "Individual Rationality and Market Efficiency," Purdue University Economics Working Papers 1204, Purdue University, Department of Economics.
    8. Jason Shachat & Zhenxuan Zhang, 2017. "The Hayek Hypothesis and Long‐run Competitive Equilibrium: An Experimental Investigation," Economic Journal, Royal Economic Society, vol. 127(599), pages 199-228, February.
    9. Ricciuti, Roberto, 2008. "Bringing macroeconomics into the lab," Journal of Macroeconomics, Elsevier, vol. 30(1), pages 216-237, March.
    10. Fenig, Guidon & Mileva, Mariya & Petersen, Luba, 2018. "Deflating asset price bubbles with leverage constraints and monetary policy," Journal of Economic Behavior & Organization, Elsevier, vol. 155(C), pages 1-27.
    11. Rud, Olga A. & Rabanal, Jean Paul & Sharifova, Manizha, 2019. "An experiment on the efficiency of bilateral exchange under incomplete markets," Games and Economic Behavior, Elsevier, vol. 114(C), pages 253-267.
    12. Guidon Fenig & Luba Petersen, 2017. "Distributing scarce jobs and output: experimental evidence on the dynamic effects of rationing," Experimental Economics, Springer;Economic Science Association, vol. 20(3), pages 707-735, September.

    More about this item

    JEL classification:

    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies

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