We investigate whether a government should lead an activist policy in a rigorous utility maximizing framework under rational expectations. The economy is a monetary one with preset wages, and is subject to both demand and supply shocks. It is assumed that the government can never act on the...

We propose a new approach to analyze economic shocks. Our new procedure identifies economic shocks as exogenous shifts in a function; hence, we call them "functional shocks." We show how to identify such shocks and how to trace their effects in the economy via VARs using "VARs with functional...

We present a model embodying moderate amounts of nominal rigidities which accounts for the observed inertia in inflation and persistence in output. The key features of our model are those that prevent a sharp rise in marginal costs after an expansionary shock to monetary policy. Of these...

Population growth rates have fallen considerably in most developed countries. An important question for monetary policy is whether this has led to a fall in the natural rate of interest. In representative agent models, the response of the natural rate to a fertility shock crucially depends on...

Nature conservation scientists and practitioners have voiced the concern that a conservation discourse based on economic arguments and monetary valuation may undermine conservation efforts by eroding ("crowding out") the influence of other arguments for nature conservation. This paper presents...