Based on an experimental analysis of a simple monetary economy we argue that a monetary system is more stable than one would expect from individual rationality. Weshow that positive reciprocity stabilizes the monetary system, provided everyparticipant considers accepting money as a reasonable...

Using the introduction of the euro as a natural experiment, we provide economy-wide evidence for money illusion based on declared donations from German administrative income tax data. Our results suggest a magnitude of the money illusion effect between 2.4% and 7.6%. Compared to previous studies...

This paper estimates the elasticity of intertemporal substitution in consumption (sigma). We exploit a natural experiment provided by a change in the Indian banking legislation which authorized all the deposit collecting institutions to offer a higher interest rate on deposits to citizens above...

The paper presents a classroom experiment designed to improve undergraduate students' understanding of how banks create money. This concept is important to Macroeconomics and Money and Banking courses, yet students frequently struggle with it, largely due to the non-physical nature of deposits...

This paper studies a coordination game with incomplete information and the option to delay. The delay option enables the agents to observe a binary signal depending on whether the early actions (e.g., investment) surpasses a threshold. The anticipation of information incentivizes agents to wait...

We compare three implementation schemes of an infinite-horizon monetary economy with discounting. Under the standard random termination scheme and its block variation, the economy lasts for an indefinite number of periods and the discounting factor is captured by the probability that the economy...

This paper combines two strands of the experimental sunspot literature. It extends the rare literature that focuses experimentally on the coordination problems caused by sunspot variables. It also extends the literature that focuses on coordination games that have a payoff-dominant and a...

We investigate competition between two intrinsically worthless currencies as a result of decentralized interactions between human subjects. We design a laboratory experiment based on a simple two-country, two-currency search model to study factors that affect circulation patterns and equilibrium...

Based on an experimental analysis of a simple monetary economy we argue that a monetary system is more stable than one would expect from individual rationality. We show that positive reciprocity stabilizes the monetary system, provided every participant considers the feedbacks of his choice to...

We integrate theory and experimental evidence to study the emergence of different international monetary arrangements based on the circulation of two intrinsically worthless fiat currencies as media of exchange. Our framework is based on a two-country, two-currency search model where the value...