In this paper, we show that underemployment and not necessarily high unemployment becomes the main measure of economic slack under secular stagnation. Specifically, persistent underemployment occurs in the search and matching model, provided that households derive utility from holding wealth,...

A tractable model with infinitely lived agents is constructed for the examination of bubbles and unemployment. It is demonstrated that the presence of bubbles stimulates capital accumulation and reduces unemployment. The presence of bubbles also changes the effects of government policies that...

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...

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...

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...

We develop an aggregate demand analysis of a small open economy based on all agents' dynamic optimization. Murota and Ono (2015) present a simple Keynesian cross analysis with dynamic optimization. This paper extends it to a small-country setting with two factors and two commodities, of which...

A tractable model with infinitely lived agents is constructed for the examination of bubbles and unemployment. It is demonstrated that the presence of bubbles stimulates capital accumulation and reduces unemployment. The presence of bubbles also changes the effects of government policies that...