On Persistent Demand Shortages: A Behavioural Approach
Yoshiyasu Ono and
The Japanese Economic Review, 2014, vol. 65, issue 1, 42-69
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.
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)
Access to full text is restricted to subscribers.
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:bla:jecrev:v:65:y:2014:i:1:p:42-69
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 ().