We develop a Keynesian cross analysis with a dynamic optimization setting that explains long-run stagnation caused by aggregate demand deficiency. We show that an increase in government purchases boosts GDP through a multiplier process, but the implication is quite different from the...

We propose a microeconomic foundation of the multiplier effect and that of the consumption function using a dynamic optimization model that explains a shortage of aggregate demand and unemployment. We show that government purchases boost aggregate demand through a multiplier-like process but...

In a Diamond-type overlapping-generations setting public debt issuance places no burden on future generations including those who repay the debt if prices and wages are fixed and unemployment occurs in the periods in which public bonds are issued and repaid. Whether the collected fund is spent...

We consider a dynamic macroeconomic model with households that regard relative affluence as social status. The measure of relative affluence can be the ratio to, or the difference from, the social average. The two specifications lead to quite different results: with the ratio specification full...

We theoretically analyze the effects of a child allowance, an improvement in the efficiency of child rearing and a labor income tax on the fertility rate and per capita consumption. The effects on per capita consumption are opposite in the absence, and the presence, of unemployment. For example,...

We consider three objects of people's status preference, consumption, physical capital holding and money holding, and show that an economy grows or stagnates depending on which object people most seriously take as status. If the main object of status preference is consumption, a steady state...

Using a dynamic two-country two-commodity Ricardian model where preference for money (or wealth) leads to aggregate demand deficiency, this paper examines the relationship between the two countries' relative population size and their specialization patterns, employment and consumption. When the...

When faced with economic stagnation, innovation, product innovation in particular, is often cited as an effective stimulus because it is thought to encourage household consumption and lead to higher demand. Using a secular stagnation model with wealth preference, we examine the effects of...

We introduce a preference for wealth into the standard search and matching model to analyze the labor market when there is persistent demand shortage. We show that, under some conditions, a secular stagnation steady state exists in which the economy permanently operates below capacity due to...