A SIMPLE MODEL OF KEYNESIAN UNEMPLOYMENT

Tetsuya Nakajima ()

Metroeconomica, 2010, vol. 61, issue 2, 239-256

Abstract: This paper presents a general equilibrium model that extends a static New Keynesian framework to an overlapping generations model. The model shows multiple stationary states, one of which has the following strong Keynesian features: (1) a reduction in wages generates increased unemployment through a decrease in consumption, and (2) the fiscal multiplier is larger than unity and is increasing in the wage share in income.

Date: 2010
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https://doi.org/10.1111/j.1467-999X.2009.04055.x

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