We develop a classroom experiment on exchange rate determination appropriate for undergraduate courses in macroeconomics and international economics. Students represent citizens from different countries and need to obtain currency to purchase goods. By participating in a sealed bid auction to...

This paper analyzes purchasing power parity and uncovered interest parity in the laboratory. It finds strong evidence that purchasing power parity, covered interest parity, and uncovered interest parity hold. Subjects are endowed with an intrinsically useless (green) currency that can be used to...