Here.

There is a feeling that the wisdom of monetarism has vanished during the last decade. Exceptional interventions of the Federal Reserve (FED) and the European Central Bank (ECB) have barely avoided deflation and have achieved delayed and modest growth. The absence of a solid monetarist explanation has been notorious. Moreover, after the formidable impact of lockdowns, many economists are now predicting a prolonged recession followed by a protracted deflation Japanese style, even when a much larger FED intervention is underway. Where is monetary policy headed to? What is ahead, inflation or deflation? Are we simply witnessing the final demise of monetarism? Or something else is at stake?

From:
Mario Teijeiro

Here.

​This paper addresses a central question of the experimental turn in economics: how a relatively small group of experimental economists in the 1970s and 1980s managed to convince editors and referees of leading economics journals of the merits of the experimental method. The consequence of this was that, by the early 1990s, experimental economics research became a standard feature of economics journals and of the economics mainstream. I draw on a unique—and, to this date, never utilized— corpus of referee reports (and related correspondence) by Charles Plott, one of the leading pioneers of experimental economics. His publication corpus is used as a case study of how experimental economists sought acceptance in economics journals. I describe a set of nine strategies that he and other early experimental economists used to convince journal editors and referees who had no direct experience with conducting economic experiments of the merits of the experimental method.

From:

Andrej Svorenčíka
​

Here.

A classroom game.

From:

Sheryl B. Ball
​Charles A. Holt

Here.

A review of research.

​Various factors and their effects on bubbles and crashes


From:

Praveen Kujal

Here.

We assess the effect of the cognitive make-up of traders on the informational efficiency of markets. We put forth that cognitive skills, such as cognitive reflection, are crucial for ensuring the informational efficiency of markets because they endow traders with the ability to infer others’ information from prices. Using laboratory experiments, we show that information aggregation is significantly enhanced when (i) all traders possess high levels of cognitive sophistication and (ii) this high level of cognitive sophistication is common information for all traders. Our findings shed light on the cognitive and informational constraints underlying the efficient market hypothesis. Keywords: Information aggregation, market efficiency, cognitive skills, cognitive 


From:

Brice Corgnet
Mark DeSantis
David Porter


​

Here.

Powerpoint version of a paper.

​This paper develops a network model of interbank lending, in which banks decide to extend credit to their potential borrowers. Borrowers are subject to shocks that may force them to default on their loans. In contrast to much of the previous literature on financial networks, we focus on how anticipation of future defaults may result in ex ante “credit freezes,” whereby banks refuse to extend credit to one another. We first characterize the terms of the interbank contracts and the patterns of interbank lending that emerge in equilibrium. We then study how shifts in the distribution of shocks can result in complex credit freezes that travel throughout the network. We use this framework to analyze the effects of various policy interventions on systemic credit freezes.

From:

James Siderius
Daron Acemoglu
Asu Ozdaglar
Alireza Tahbaz-Salehi

Here.

The causal effects of central bank communication on economic expectations and their underlying mechanisms are tested in controlled laboratory experiments. We find that central bank communication has a stabilizing effect on individual and aggregate outcomes, and the size of the effect varies with the type of communication. Announcing past interest rate changes has the largest effect, reducing volatility of individual price and expenditure forecasts by one-quarter and four-fifths, respectively, and cutting a quarter of macroeconomic volatility. Forward-looking announcements have less effect on individual forecasts, especially if they do not clarify the timing of future policy changes. There is little evidence that central bank communication transmits via its influence on forecasters’ ability to predict future nominal interest rates. Rather, communication is effective via simple and relatable backward-looking announcements that exert strong influence on less-accurate forecasters. 

From:

Oleksiy Kryvtsova
Luba Petersen

Here.

Journal of Economic Literature 2020

​In this essay, I reflect on textbook writing after three decades of participating in the activity. I address the following questions: What perspective should textbooks take? What is the best approach to teaching microeconomics? What is the best approach to teaching macroeconomics? How does the content of the introductory course evolve? How much material should textbooks include? Are textbooks too expensive? How is digital technology changing the market for textbooks? Who should become a textbook author? 

From:
Greg Mankiw

Here.

This classroom experiment introduces students to the notion of credit risk and expected return, by allowing them to trade on comparable corporate bond issues from two types of markets: investmentgrade and high-yield markets. Investment-grade issues have a lower probability of default than high-yield issues and thus provide a lower yield. Participants can earn money in three ways: from coupon payments, from the face value of the bond, and by capital gains. While participating in an experiment, students learn about the notion of risk and return, how credit risk affects bond prices, the movement of bond prices through time, and other general characteristics of the bond markets.

From:

Maros Servatka
George Theocharides

Here.

​As legal research and scholarship are increasingly turning to interdisciplinary approaches, the question arises as to how to introduce quantitative research techniques to a student population usually unfamiliar with empirical methods. We argue that classroom experiments form an effective — and, from the perspective of students, attractive — way to teach law students the logic of empirical inquiry. Many questions and controversies on and around adjudication and the impact of legal regulations hinge on matters of beliefs and behaviour which experimental methods are well-suited to investigate. Moreover, experimental legal research is fairly intuitive and does not require advanced statistical knowledge. Thanks to modern software tools, experiments can be conducted and analysed in the classroom without much prior technical knowledge. We provide basic guidance on how to undertake in-class experimental legal research and discuss examples of in-class experiments on gender effects, anchoring effects and neutrality bias.



From:

Arthur Dyevre 
Michal Ovádek

Here.

Free trade has long been hailed as the world’s answer to increased competitiveness, greater overall wealth and a higher standard of living. Adam Smith’s ideas on the foundations of capitalism assert that open market policies lead to global economic growth, and conversely that protectionist measures stunt growth and inflate prices. Critics argue that protectionism helps protect developing markets and industries and prevents unfair competition. But in the debate over trade which economic policy is actually best?

To answer this question I conducted an experiment using the board game, The Settlers of Catan, as an economic model.

I isolated trade as a variable and looked at what effect the frequency and magnitude of trade had on resource and point accumulation within the game. I collected data for 10 games where trade was allowed and 10 games where it was forbidden, attempting to identify an empirical contrast between the two versions. What I found is that no-trade games consistently out produced freetrade games in terms of both point and resource accumulation, and that there was no correlation between trade and either total points or total resources.

I also found that despite being given the option to trade, players would frequently reject seemingly fair offers and instead pay a higher price for resources through the in-game bank. I reasoned that this behavior was a result of players trying to maintain or extend their competitive advantage, which they were able to do by maximizing their utility, or value gained, for the game as a whole rather than at any one specific stage in the game. This explains why trading was so rare and why no-trade games outperformed full-trade games in the experiment. The significance of this result can be especially felt in the labor market, where labor is a resource traded by workers to their employers. I use the recent NFL and NBA lockouts as case studies to show how utility maximization behavior can be applied to real world economic situations. 


Dmitriy Ioselevich

Here.

We assess the effect of the cognitive make-up of traders on the informational efficiency of markets. We put forth that cognitive skills, such as cognitive reflection, are crucial for ensuring the informational efficiency of markets because they endow traders with the ability to infer others’ information from prices. Using laboratory experiments, we show that information aggregation is significantly enhanced when (i) all traders possess high levels of cognitive sophistication and (ii) this high level of cognitive sophistication is common information for all traders. Our findings shed light on the cognitive and informational constraints underlying the efficient market hypothesis.

​
Brice Corgnet
Mark DeSantis
David Porter


​

Here.

​The interplay between individual creative ability and the way to enhance it – through monetary and nonmonetary incentives – is an issue with tremendous potential for economic analysis. In this survey, we dwell into the issue by focusing on the methodological advantages of economic experiments. We provide a review of the literature in experimental economics on creativity, identifying six main directions of analysis. Namely, the impact on creativity of: (1) low vs high monetary incentives, (2) the interplay of monetary incentives and tasks, (3) within-group competition, (4) within-group cooperation, (5) cultural factors, and (6) non-monetary social incentives. In the spirit of a “meta-study,” we classify the works in our review not only according to the aforementioned research questions, but also disentangling by the type of creative task that the experimental subjects face, the way in which creativity is assessed, and other key features of standard experimental procedures in economics. This multidimensional comparison allows us to conclude that the current lack of robust findings on the determinants of creativity in economics might be due to the absence of comparable experimental studies under the same experimental conditions. We conduct our analysis without neglecting the psychological roots of creativity research and their way through management, underlying how both disciplines have heavily outlined the work of experimental economists in the topic of creativity.


From:
Giuseppe Attanasi
Michela Chessa
Sara Gil Gallen
Patrick Llerena

Here.

We use controlled laboratory experiments to test the causal effects of central bank communication on economic expectations and to distinguish the underlying mechanisms of those effects. In an experiment where subjects learn to forecast economic variables, we find that central bank communication has a stabilizing effect on individual and aggregate outcomes and that the size of the effect varies with the type of communication. Announcing past interest rate changes has the largest effect, reducing individual price and expenditure forecast volatility by one- and two-thirds, respectively; cutting half of inflation volatility; and improving price-level stability. Forward-looking announcements in the form of projections and forward guidance of upcoming rate decisions have less effect on individual forecasts, especially if they do not clarify the timing of future policy changes. Our evidence does not link the effects of communication to forecasters’ ability to predict future nominal interest rates. Rather, communication is effective via simple and relatable backwardlooking announcements that exert strong influence on less-accurate forecasters. We conclude that increasing the accessibility of central bank information to the general public is a promising direction for improving central bank communication.

Oleksiy Kryvtsov
Luba Petersen