Liquidity Preference and Persistent Unemployment with Dynamic Optimizing Agents
AbstractStandard money-in-utlity dynamic models assume satiable liquidity preference, and thereby prove the existence of a full employment steady state. Using the same model, Ono (1994) shows that under insatiable liquidity preference there is a case where a full employment steady state does not exist and then unemployment persistently occurs. Using both parametric and nonparametric methods this paper empirically finds that insatiable liquidity preference is strongly supported. Thus, without assuming any permanent distortion as Old and New Keynesians do, we can analyze an effective demand shortage in a dynamic optimization framework.
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Bibliographic InfoPaper provided by Institute of Social and Economic Research, Osaka University in its series ISER Discussion Paper with number 0461.
Length: 18 pages
Date of creation: 1998
Date of revision:
UNEMPLOYMENT ; OPTIMIZATION ; LIQUIDITY ; PREFERENCE CHOICES;
Find related papers by JEL classification:
- E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian
- E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
- E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
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