Experimental design to isolate causes of monetary non-neutrality

Abstract

This chapter presents an experimental design which allows to implement an anticipated monetary shock and to observe nominal as well as real variables (and, thus, monetary (non-)neutrality). The discussion proceeds as follows: Section 2.1. provides a general description of the design. Section 2.2. explains procedures and parameters. Section 2.3. describes the treatments in detail. Section 2.4. mentions advantages of the experimental design in the investigation of monetary non-neutrality.

“Experimental models can allow you to see, on a small scale, the essence of events that occur in the vastly larger and more complex real world. but how could you experimentally produce recessions and recoveries?”

Paul Krugman (1994: 29)