Abstract We analyze involuntary unemployment based on consumers’ utility maximization and firms’ profit behavior with ongoing nominal wage rate decline. consider a three-periods overlapping generations (OLG) model childhood period as well younger older periods under monopolistic competition increasing, decreasing or constant returns to scale technology. When there exists unemploymnet, the may e...

I analyze an extension of the New Keynesian model that features overlapping generations finitely lived agents and (stochastic) transitions to inactivity. In contrast with standard model, proposed framework allows for existence rational expectations equilibria asset price bubbles. study conditions under which bubble-driven fluctuations may emerge type monetary policy rules prevent them. conclude...