Economics at your fingertips  

On Persistent Demand Shortages: A Behavioural Approach

Yoshiyasu Ono and Junichiro Ishida

The Japanese Economic Review, 2014, vol. 65, issue 1, 42-69

Abstract: type="main">

We incorporate two sets of behavioural assumptions, fairness concerns and insatiable desire for money, into a dynamic optimization model to illuminate how they can generate persistent aggregate demand shortages. We obtain the conditions for persistent unemployment and temporary unemployment. Policy implications differ significantly between the two cases. A monetary expansion raises private consumption under temporary unemployment but not under persistent unemployment. A fiscal expansion may or may not increase short-run private consumption but crowds out long-run consumption under temporary unemployment. Under persistent unemployment, however, a fiscal expansion always increases private consumption. The “paradoxes of toil and flexibility” also appear.

Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (21) Track citations by RSS feed

Downloads: (external link) (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=1352-4739

Access Statistics for this article

The Japanese Economic Review is currently edited by Akira Okada

More articles in The Japanese Economic Review from Japanese Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().

Page updated 2021-01-21
Handle: RePEc:bla:jecrev:v:65:y:2014:i:1:p:42-69