Munich Personal RePEc Archive

Involuntary unemployment as a Nash equilibrium and fiscal policy

Tanaka, Yasuhito (2020): Involuntary unemployment as a Nash equilibrium and fiscal policy.

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Abstract

Using two types of overlapping generations (OLG) model, we show that involuntary unemployment is in a Nash equilibrium of a game with a firm and consumers, and we can achieve full-employment by fiscal policy financed by seignorage not tax. Once we achieve it, it is maintained without government expenditure. Also we show that a fall in the nominal wage rate may not decrease involuntary unemployment.

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