Lectures on Experimental Macroeconomics by Daniela Puzzello (Indiana)
Overview: Vernon Smith won the Nobel prize in 2002 “for having established laboratory experiments as a tool in empirical analysis, especially in the study of alternative market mechanisms.” Applications of experimental methods are now widespread in microeconomics and finance. Based on the advances and insights gained from this research, in this lecture, we argue a similar approach can provide valuable insights in macroeconomics, especially considering the development of micro-founded models and recent technological advances allowing for the implementation of large-scale economies. This lecture will be organized around:
1. the underlying principles of the experimental methodology
2. applications of the experimental method to monetary economics.
Examples of research questions that can be investigated using such experimental methods coupled with theoretical models based on micro-foundations include: Under what circumstances is money essential? To what extent do laboratory experiments yield support that monetary policies work as intended and, if not, why? Do legal restrictions and government interventions affect the circulation of multiple currencies? Which bargaining solution/bargaining weight best organize laboratory data in the context of two-dimensional bargaining problems adopted in monetary and labor economics?