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The B.E. Journal of Macroeconomics

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

Romain Baeriswyl / Camille Cornand
  • Université de Lyon, Lyon, F-69007, France
  • CNRS, GATE Lyon Saint-Etienne, Ecully, F-69130, France
  • Other articles by this author:
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Published Online: 2018-01-12 | DOI: https://doi.org/10.1515/bejm-2017-0037


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.

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

JEL Classification: C92; E52; E58


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About the article

Published Online: 2018-01-12

Citation Information: The B.E. Journal of Macroeconomics, Volume 18, Issue 2, 20170037, ISSN (Online) 1935-1690, DOI: https://doi.org/10.1515/bejm-2017-0037.

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