Comparative Statics by Adaptive Dynamics and the Correspondence Principle

This paper formalizes the relation between comparative statics and the out-of-equilibrium explanation for how a system evolves after a change in parameters. The paper has two main results. First, an increase in an exogenous parameter sets o learning dynamics that involve larger values of the endogenous variables. Second, equilibrium selections that are not mono- tone increasing in the exogenous variables must be predicting unstable equilibria. Moreover, under some conditions monotone comparative statics and stability are equivalent.