We have just added a new experiment: “A Classroom Inflation Uncertainty Experiment” by Denise Hazlett (IREE 2007).
Abstract of the paper:
“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 8–60 students…”by