{"about":{"site":"https://codewithpapers.app","non_affiliation":"Code with Papers and Syntology are not affiliated with, endorsed by, or sponsored by Papers with Code, Meta, or the pwc-archive mirror.","licence":"CC BY-SA 4.0","licence_url":"https://creativecommons.org/licenses/by-sa/4.0/legalcode","attribution":"https://codewithpapers.app/attribution","modified":"archive material modified by Syntology; see the attribution page"},"url":"/paper/resolving-new-keynesian-anomalies-with-wealth","title":"Resolving New Keynesian Anomalies with Wealth in the Utility Function","arxiv_id":"1905.13645","date":"2019-12-11","proceeding":null,"authors":[],"abstract":"At the zero lower bound, the New Keynesian model predicts that output and\ninflation collapse to implausibly low levels, and that government spending and\nforward guidance have implausibly large effects. To resolve these anomalies, we\nintroduce wealth into the utility function; the justification is that wealth is\na marker of social status, and people value status. Since people partly save to\naccrue social status, the Euler equation is modified. As a result, when the\nmarginal utility of wealth is sufficiently large, the dynamical system\nrepresenting the zero-lower-bound equilibrium transforms from a saddle to a\nsource---which resolves all the anomalies.","url_abs":"http://arxiv.org/abs/1905.13645v3","url_pdf":"http://arxiv.org/pdf/1905.13645v3.pdf","source":{"archive":"pwc-archive (Hugging Face), CC BY-SA 4.0","snapshot":"2025-07-28","licence_url":"https://creativecommons.org/licenses/by-sa/4.0/legalcode","row_kind":"abstracts"},"code_links":[{"paper_slug":"resolving-new-keynesian-anomalies-with-wealth","repo_url":"https://github.com/pmichaillat/wunk-model","is_official":1,"mentioned_in_paper":0,"mentioned_in_github":0,"framework":"none","reach":null}],"tasks":[],"methods":[],"datasets_introduced":[],"methods_introduced":[],"results":[],"syntology":{"syntology_url":null,"atlas_url":null,"mcp":null,"developers":"https://syntology.ai/developers"},"arxiv_metadata":null,"syntology_extracted_results":null}