MET Seminar - Ludvig Sinander (Oxford)
| Dates: | 22 March 2023 |
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| Times: | 17:00 - 18:00 |
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| What is it: | Seminar |
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| Organiser: | School of Social Sciences |
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| Who is it for: | University staff, Current University students |
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Title: Comparative statics with adjustment costs and the le Chatelier principle (joint with Eddie Dekel and John Quah)
Abstract: We develop a theory of monotone comparative statics for models with adjustment costs. We show that comparative-statics conclusions may be drawn under the usual ordinal complementarity assumptions on the objective function, assuming very little about costs: only a mild monotonicity condition is required. We use this insight to prove a general le Chatelier principle: under the ordinal complementarity assumptions, if short-run adjustment is subject to a monotone cost, then the long-run response to a shock is greater than the short-run response. We extend these results to a fully dynamic model of adjustment over time: the le Chatelier principle remains valid, and under slightly stronger assumptions, optimal adjustment follows a monotone path. We apply our results to models of capital investment and of sticky prices.
Full paper: https://arxiv.org/abs/2206.00347
MET full schedule: http://daviddelacretaz.net/seminars/
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Room G.020
Arthur Lewis Building
Manchester
