Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/92597
Authors: 
Ono, Yoshiyasu
Ishida, Junichiro
Year of Publication: 
2009
Series/Report no.: 
ISER Discussion Paper, Institute of Social and Economic Research, Osaka University 760
Abstract: 
We formulate nominal wage adjustment by incorporating various concepts of fairness. By applying it into a continuous-time money-in-utility model we examine macroeconomic dynamics with and without a liquidity trap and obtain the condition for persistent unemployment, and that for temporary unemployment, to occur. These conditions turn out to be critical, since policy implications significantly differ between the two cases. A monetary expansion raises private consumption under temporary unemployment but does 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, it always increases private consumption.
Subjects: 
Wage adjustment
Fairness
Phillips curve
Demand shortage
Persistent stagnation
JEL: 
E52
E31
Document Type: 
Working Paper

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