This paper resolves the anomalies of the New Keynesian model at the zero lower bound—explosive recession, forward-guidance puzzle, multiplier puzzle—by introducing wealth into the utility function.
This paper shows that when unemployment is inefficient, optimal public expenditure deviates from the Samuelson rule to reduce the unemployment gap. Optimal stimulus spending depends on the unemployment gap, unemployment multiplier, and an elasticity of substitution.
This paper develops a New Keynesian model in which the government multiplier doubles when the unemployment rate rises from 5% to 8%. The multiplier is so countercyclical because in bad times, on the labor market, job rationing dwarfs matching frictions.