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In this paper, rather than looking at a firm's response to a hypothetical cost shock, we concentrate on its actual response during the Great Recession's initial phase in Europe from the start of the crisis (third quarter of 2008) through mid-2009.
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We consider a two period model of optimal regulation of a firm subject to marginal compliance cost shocks.
Under persistent shocks, numerical simulations show that increasing the preference for robustness continues to imply more aggressive responses to cost shocks.
We derive sufficient conditions under which abatement is invariant to compliance timing, i.e., compliance timing cannot smooth abatement cost shocks.
If all exogenous disturbances are white noises, increasing the preference for robustness or the size of wealth effects implies more aggressive policy responses to cost shocks.
This paper presents and discusses direct and indirect transmission channels for price shocks, and firms' response measures: absorbing cost shocks into profits, inter-fuel substitution, increasing energy and material efficiency, and passing on price increases.
We find that positive BDI cost shocks are followed by significant contraction in income through trade channel and significant improvement in democratic institutions, where BDI can open a window of opportunity for democratic improvement.
The two acts by the European group dedicated to keeping Algeria French at all costs shocked the French capital out of any complacency.
Taxes are a cost, and people and firms reflexively adjust to reduce the price shock.
Strikingly, citalopram nearly doubled the subjective cost per shock, both for self (from 35p to 60p per shock) and others (from 44p to 73p per shock).
Prof Hamilton concluded that the collapse of the housing bubble was triggered by the post-2005 oil price shocks which escalated cost of living and induced sweeping consumer debt-defaults.
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