The distortionary effect of monetary policy: credit expansion vs. lump-sum transfers in the lab

Romain Baeriswyl (1) , Camille Cornand (2)

1 Swiss National Bank
2 GATE Lyon Saint-Étienne - Groupe d'Analyse et de Théorie Economique Lyon - Saint-Etienne

In an experimental monetary general equilibrium economy, we assess two processes of monetary injection: credit expansion vs. lump-sum monetary transfers. In theory, both processes are neutral and exert no real effect on allocation. In the experiment, however, credit expansion leads to substantial distortions of real allocation and relative prices, and exerts a redistributive effect across subjects. By contrast, an increase in money through lump-sum transfers does not distort real allocation.

Mots clés: money neutrality; credit expansion; lump-sum monetary transfers; laboratory experiment; money neutrality; credit expansion; lump-sum monetary transfers

Domaines: Economies et finances

Romain Baeriswyl, Camille Cornand. The distortionary effect of monetary policy: credit expansion vs. lump-sum transfers in the lab. 2015. ⟨halshs-01161854v4⟩