An intensive 5-day summer school devoted to instructing macroeconomists in experimental methods will be offered on the main campus of State University of New York (SUNY) at Stony Brook, from July 17-23, 2017. The aim of the summer school will be both to promote experimental methods among macroeconomists and to assist with and critique participants' proposals for macroeconomic experiments.

Additionally students of the summer school are invited to the 2-day 8th BESLab International Workshop from July 18 -19, 2017.

There are many insights to be gained from controlled laboratory experimentation that cannot be obtained using standard macroeconometric approaches, i.e., econometric analyses of the macroeconomic data reported by government agencies. Often the data most relevant to testing a macroeconomic model are simply unavailable. There may also be identification, endogeneity and equilibrium selection issues that cannot be satisfactorily addressed using econometric methods. Indeed, Nobel Laureate Robert Lucas (1986) was among the first macroeconomist to make such observations and he invited laboratory tests of rational expectations macroeconomic models. The summer school will review the experimental literature in macroeconomics that has arisen in the 20 years since Lucas's invitation. A tentative schedule of topics to be covered is given below.

Files

July 16: Reception (to be confirmed)

July 17: Introduction

July 18 and 19: Attendance of conference

July 20: Designing Macro experiments 

July 21: Financial Markets and Stabilization Policies

July 22: Coordination

July 23: Growth

Gabriele Camera

Gabriele Camera is Professor of Economics and Finance at the Economic Science Institute, Chapman University. He is also Professor of Economics at the WWZ, University of Basel on a part-time basis. His research interest spans several areas, including economic theory, experimental economics, industrial organization, labor economics, macroeconomics and monetary economics.

Selected publications:

Camera G., and J. Kim (forthcoming). Dynamic directed search. Economic Theory.

Camera, G., and A. Gioffrè (2014). Game-theoretic foundations of monetary equilibrium. Journal of Monetary Economics 63, 51–63.

Camera, G., and M. Casari (2014). The coordination value of monetary exchange: experimental evidence. American Economic Journal: Microeconomics 6(1), 290–314.

Camera, G., and Y. Chien (2014). Understanding the distributional impact of long-run inflation. Journal of Money, Credit and Banking 46(6), 1137–1170.

Camera, G., M. Casari, and M. Bigoni (2013). Money and trust among strangers. Proceedings of the National Academy of Sciences 110(37), 14889–14893.

John Duffy

John Duffy is Professor of Economics at the University of California, Irvine. He does research on the micro-foundations of macro-economic activity. His aim is to understand how groups of individuals (societies) make economic forecasts and decisions and how they resolve coordination problems. He have attempted to address such questions using theoretical models, computational methods and controlled laboratory experiments with human subjects. 

Selected publications:

"Macroeconomics: A Survey of Laboratory Research" to appear in Handbook of Experimental Economics, Volume 2, A. Roth and J. Kagel, editors.

"Cooperative Behavior and the Frequency of Social Interaction," (with J. Ochs), forthcoming in Games and Economic Behavior.

"Sunspots in the Laboratory," (with E. O'N. Fisher), American Economic Review 95 (2005), 510-529.

"Intrinsically Worthless Objects as Media of Exchange: Experimental Evidence," (with J. Ochs), International Economic Review 43 (2002), 637-673.

Frank Heinemann

Frank Heinemann is Professor of Macroeconomics at Berlin Institute of Technology, Germany. He earned his PhD in Mannheim in 1996. He has taught macroeconomics and game theory at the universities of Frankfurt am Main, Munich (LMU) and Mannheim and at the German central bank (Bundesbank) before he changed to Berlin in 2006. His main areas of research are monetary macroeconomics and coordination games.

Selected publications:

"Speculative Attacks with Multiple Sources of Public Information" (with Camille Cornand), Scandinavian Journal of Economics 111 (1), 2009, pp. 73-102.

"Optimal Degree of Public Information Dissemination" (with Camille Cornand), The Economic Journal 118 (April), 2008, pp. 718-742.

"The Theory of Global Games on Test: Experimental Analysis of Coordination Games with Public and Private Information" (with Rosemarie Nagel and Peter Ockenfels), Econometrica 72 (5), 2004, pp. 1583-1599.

"Speculative Attacks: Unique Equilibrium and Transparency" (with Gerhard Illing), Journal of International Economics 58 (2), 2002, pp. 429-450.

Rosemarie Nagel

Rosemarie Nagel is ICREA research professor at the Universitat Pompeu Fabra (UPF-BGSE), research director of the experimental laboratory (LEEX-UPF), and member of CESifo. She earned her PhD in the European Doctoral Program at the University of Bonn (1994). Her research interest is in experimental economics, behavioural economics, and neuro economics .

Selected publications:

"The agencies method for coalition formation in experimental games," (with John Nash Jr, Axel Ockenfels, and Reinhard Selten), Proceedings of the National Academy of Sciences (PNAS), Dec. 11, 2012, 109 (50), 20358-20363.

"Measuring Strategic Uncertainty in Coordination Games" (with Frank Heinemann and Peter Ockenfels), Review of Economic Studies, 76, 2009, pp. 181-221.

"Neural correlates of depth of strategic reasoning in medial prefrontal cortex" (with Giorgio Coricelli), Proceedings of the National Academy of Sciences (PNAS): Economic Sciences,
PNAS June 9, 2009 vol. 106 no. 23 9163-9168

"One, Two, (Three), Infinity...: Newspaper and Lab Beauty-Contest Experiments", (with Antoni Bosch-Domènech , Jose García-Montalvo , and Albert Satorra), American Economic Review December 92 (5), 2002, pp 1687-1701.

Shyam Sunder

Shyam Sunder is the James L. Frank Professor of Accounting, Economics, and Finance at the Yale School of Management; Professor in the Department of Economics; and Fellow of the Whitney Humanities Center. His research contributions include financial reporting, dissemination of information in security markets, statistical theory of valuation, and design of electronic markets. He is a pioneer in the fields of experimental finance and experimental macroeconomics.  Sunder's current research includes the problem of structuring U.S. and international accounting and auditing institutions to obtain a judicious and efficient balance between regulatory oversight and market competition. He is in the editorial board of Journal of Accounting and Public Policy, Experimental Economics, Indian Accounting Review, Computational & Mathematical Organization Theory.

Selected publications:

"Price Bubbles Sans Dividend Anchors: Evidence from Laboratory Stock Markets" (with S. Hirota), Journal of Economic Dynamics and Control, Vol. 31, No. 6, 1875-1909, June, 2007.

"Regulation and the Marketplace " (with K. Jamal and M. Maier), Regulation, Vol. 6 No. 4, Winter 2003-2004.

"Markets as Artifacts: Aggregate Efficiency from Zero-Intelligence Traders" (with M.E. Augier and J.G. March), Models of a Man: Essays in Memory of Herbert A. Simon, Cambridge, MA: MIT Press, 2004.

Gabriele Camera

• Monetary Experiments and Economic Growth Experiments:

The lecture is divided into two segments: Monetary Experiments and Economic Growth Experiments. At the start of each segment a brief theory part will develop a theoretical platform for monetary models (first segment of lecture) and classical growth models (second segment of lecture). The second segment will focus on models of representative agents and competitive equilibrium. The first segment will focus on models of strategic interaction and Nash equilibrium, which have been adopted to study a variety of topics including labor, IO, money and finance; this overlap opens the door to exploring related applications, such as cooperation, collusion, trust, equilibrium selection, coordination.

The main goals are: (1) To review basic techniques used in theoretical modeling of growth and of money; (2) To study how those models have been brought to the lab, (3) To understand the insights emerging from recent experimental applications. At the end of the course students will possess an expanded set of tools, which will be helpful to read critically the literature and to engage independent research.

The papers listed in the Literature below are in addition to relevant papers that are already covered elsewhere in the workshop.

• General literature

Bigoni, M., G. Camera, and M. Casari (2014). Money is more than memory. Economic Science Institute working paper # 14-17

Bigoni, M., G. Camera, and M. Casari (2015). Money and the scale of cooperation. Economic Science Institute working paper # 15-28

Camera, G., and M. Casari (2009). Cooperation among strangers under the shadow of the future. American Economic Review 99(3), 979–1005.

Camera, G., M. Casari, and M. Bigoni (2013). Experimental Markets with Frictions. Journal of Economic Surveys 27(3), 536–553.

Camera, G., M. Casari, and M. Bigoni (2013). Money and trust among strangers. Proceedings of the National Academy of Sciences 110(37), 14889-14893.

Camera, G., and M. Casari (2014). The coordination value of monetary exchange: experimental evidence. American Economic Journal: Microeconomics 6(1), 290-314.

Diamond P., (1982). Aggregate Demand Management in Search Equilibrium. Journal of Political Economy 90, 881‑894.

Duffy, John (forthcoming). Macroeconomics: A Survey of Laboratory Research. In: Handbook of Experimental Economics, volume 2, John Kagel and Al Roth editors.

Ellison, Glenn (1994). Cooperation in the prisoner's dilemma with anonymous random matching. Review of Economic Studies, 61, 567-88.

Kandori, Michihiro (1992). Social norms and community enforcement. Review of Economic Studies, 59, 63-80.

Kocherlakota, N. (1998). Money is memory. Journal of Economic Theory 81, 232-251

Lei V., and C. Noussair (2002). An Experimental Test of an Optimal Growth Model. American Economic Review 92(3), 549-570.

Capra, M., C. Camerer, T. Tanaka, L. Feiler, V. Sovero, and C. Noussair (2009). The Impact of Simple Institutions in Experimental Economies with Poverty Traps. Economic Journal 119(539), 977 - 1009.

Smith, Vernon L. (1994). Economics in the Laboratory. Journal of Economic Perspectives 8(1), 113-131

Townsend, R. (1980). Models of Money with Spatially Separated Agents. In Models of Monetary Economies, J. Kareken and N. Wallace editors, p. 265-303

John Duffy

• Overview of Macroeconomic Experiments

This lecture will expose participants to the breadth of macroeconomic topics and questions that have been explored using laboratory methods. The aim of this lecture will be to stimulate thinking about ideas for new projects that build on what has already been done. In addition, participants will be encouraged to extend laboratory methods to macroeconomic models or questions that have not been previously addressed. Methodological issues that are particularly relevant to macroeconomic experiments, e.g., implementation of discounting and infinite horizons, will also be addressed.

• Readings:

Duffy, J. (fortcoming), "Macroeconomics: A Survey of Laboratory Research" to appear in Handbook of Experimental Economics, vol. 2, edited by John Kagel and Al Roth.

Ochs, J. (1995), "Coordination Problems," in J. Kagel and A.E. Roth, (Eds.),The Handbook of Experimental Economics, (Princeton: Princeton University Press).

Ricciuti, R. (2005), "Bringing Macroeconomics into the Lab," working paper, University of Siena.

Duffy, J. (1998), "Monetary Theory in the Laboratory," Federal Reserve Bank of St. Louis Review 80, 9-26.

• Monetary Theory

Among the central questions in monetary theory are why intrinsically worthless fiat money serves as a store of value and why it is used as a medium of exchange when other assets dominate it in rate of return. Various theories have been developed to address these fundamental questions. For instance, overlapping generations models of money may explain why fiat money has value, and search-theoretic approaches can rationalize why money is used when dominated in rate of return by other competing assets. However, the frictions in these models -overlapping generations and search frictions- make them difficult to take to field data. On the other hand, a number of laboratory studies of such models have been conducted. These lectures will outline the main findings from those studies and point out promising new extensions.

• Literature:
• Introduction

Duffy, J. (1998), "Monetary Theory in the Laboratory," Federal Reserve Bank of St. Louis Review 80 (September/October), 9-26.

• Theory:

Lucas, R.E. (1986), "Adaptive Behavior and Economic Theory," Journal of Business 59,
S401-S426.

Wallace, N. (1980), "The Overlapping Generations Model of Fiat Money," in J.H. Kareken and N. Wallace, Eds., Models of Monetary Economies, Federal Reserve Bank of Minneapolis

Kiyotaki, N. and R. Wright (1989), "On Money as a Medium of Exchange," Journal of Political Economy 97, 927-54

• Experiments:

Bernasconi, M. and Kirchkamp, O. (2000), "Why Do Monetary Policies Matter? An Experimental Study of Saving and Inflation in an Overlapping Generations Model," Journal of Monetary Economics 46, 315-43.

Brown, P. (1996), "Experimental Evidence on Money as a Medium of Exchange," Journal of Economic Dynamics and Control 20, 583-600.

Camera, G., Noussair, C., and Tucker, S. (2003), "Rate-of-Return Dominance and Efficiency in an Experimental Economy," Economic Theory 22, 629-60.

Duffy, J. and J. Ochs (2002), "Intrinsically Worthless Objects as Media of Exchange: Experimental Evidence," International Economic Review 43, 637-73.

Duffy, J. and J. Ochs (1999), "Emergence of Money as a Medium of Exchange: An Experimental Study," American Economic Review 89, 847-77.

Lim, S. Prescott, E.C. and Sunder, S. (1994), "Stationary Solution to the Overlapping Generations Model of Fiat Money: Experimental Evidence," Empirical Economics 19, 255-77.

Marimon, R. and Sunder, S. (1994), "Expectations and Learning under Alternative Monetary Regimes: An Experimental Approach," Economic Theory 4, 131-62.<

Marimon, R. and Sunder, S. (1993) "Indeterminacy of Equilibria in a Hyperinflationary World: Experimental Evidence," Econometrica 61, 1073-107.

Frank Heinemann

• Understanding Financial Crises: The Contribution of Experimental Economics

The patterns of financial crises are remarkably predictable. Minsky (1972) has described these patterns by phases, some of which contain behavioural hypotheses that can be tested by laboratory experiments. Under which conditions can bubbles arise? When do they burst? Why do people herd and does herding destabilize financial markets? What triggers a bank run and how do people coordinate in an environment with multiple equilibria? This lecture will lay out experimental evidence containing some answers to these questions. In particular, we will look at experiments on games with strategic complementarities. How predictable are choices if the game has multiple equilibria and which theory is well-suited to give advice for individual behavior? Managing information flow is one of the major challenges for central banks and bank supervisors. The lecture explains what we can learn from experiments for managing information flow in the presence of strategic complementarities.

• Literature:

Minsky, H.P. (1972), Financial Instability Revisited: the Economics of Disaster.

Brunnermeier, Markus, and John Morgan (2008), Clock Games: Theory and Experiments, Games and Economic Behavior, forthcoming, http://www.princeton.edu/~markus/research/papers/clock_games.pdf

Kübler, Dorothea, and Georg von Weizsäcker (2004), Limited Depth of Reasoning and Failure of Cascade Formation in the Laboratory, Review of Economic Studies 71, 425-442.

Schotter, Andrew, and Tanju Yorulmazer (2009), On the Severity of Bank Runs,  Journal of Financial Intermediation 18, 217-241.

Heinemann, Frank, Rosemarie Nagel, and Peter Ockenfels (2009), Measuring Strategic Uncertainty in Coordination Games, Review of Economic Studies 76, 181-221.

Cornand, C., and F. Heinemann (2010), Measuring Agents' Reaction to Private and Public Information in Games with Strategic Complementarities, CESifo Working Paper 2947

Heinemann, Frank (2012), Understanding Financial Crises: The Contribution of Experimental Economics, Annals of Economics and Statistics, 107-108, 2012, pp. 7-29,

http://www.macroeconomics.tu-berlin.de/fileadmin/fg124/heinemann/publications/Understanding_Financial_Crises.pdf

• Speculative Attacks and the Theory of Global Games - Experimental Tests of Global Game Predictions

Speculative attacks can be viewed upon as coordination games: if a sufficient number of traders (and a sufficient amount of capital) is involved in an attack, the pressure on foreign exchange markets forces the central bank to devaluate its currency. Then, all attacking traders gain from the devaluation. But, if the number of attackers is too small, the central bank can defend the peg, and attacking traders lose on transaction costs. Speculative-attack games have multiple equilibria if payoff functions are common knowledge. The theory of global embeds a coordination game in an environment with private information about parameters of the payoff function. If private information is sufficiently precise, the global game has a unique equilibrium. Hence, the theory of global games can be used for a unique prediction of the outcome of a speculative-attack game. This theory provides a number of hypotheses that can be tested in laboratory experiments. This lecture first presents some of the theoretical background and derives testable hypotheses. Then, it explains experiments that have been used for these tests and shows how they have been analyzed.

• Literature:

Introduction:

Heinemann, Frank (2002), "Exchange-Rate Attack as a Coordination Game: Theory and Experimental Evidence," Oxford Review of Economic Policy 18, 462-478.

• Theory:

Obstfeld, Maurice (1997), "Destabilizing Effects of Exchange-Rate Escape Clauses," Journal of International Economics, 61-77.

Carlsson, Hans and Eric van Damme (1993), "Global Games and Equilibrium Selection," Econometrica 61, 989-1018.

Morris, S., and H.S. Shin (1998), "Unique Equilibrium in a Model of Self-Fulfilling Currency Attacks," American Economic Review, 88, 587-597.

Heinemann, Frank (2000), "Unique Equilibrium in a Model of Self-Fulfilling Currency Attacks: Comment," American Economic Review 90, 316-318.

Hellwig, Christian (2002), "Public Information, Private Information, and the Multiplicity of Equilibria in Coordination Games," Journal of Economic Theory 107, pp. 191-222.

• Experiments:

Heinemann, F., R. Nagel, and P. Ockenfels (2004), "The Theory of Global Games on Test: Experimental Analysis of Coordination Games with Public and Private Information," Econometrica 72 (5), 2004, pp. 1583-1599.

Cornand C. (2006), "Speculative Attacks and Informational Structure: An Experimental Study," Review of International Economics 14, 797-817.