Modeling inventories over the business cycle
By: Aubhik Khan and Julia K. Thomas.
Contributors: Thomas, Julia K.
Series: Federal Reserve Bank of Minneapolis, Research Department staff report ;; 343; Staff report (Federal Reserve Bank of Minneapolis. Research Dept. : Online) ;; 343.
Publisher: Federal Reserve Bank of Minneapolis
Published: 2004
Place of publication: [Minneapolis, Minn.]
Language: eng
Format: Electronic resource
Subjects: Inventories -- United States -- Econometric models.; Business cycles -- United States -- Econometric models.
Description: "We evaluate two leading models of aggregate fluctutations with inventories in general equilibrium: the (S,s) model and the stockout avoidance model.  Each is judged by its ability to explain the observed magnitude of inventories in the U.S.  economy, alongside other empirical regularities such as the procyclicality of inventory investment and its positive correlation with sales.  We find that the (S,s) model is far more consistent with the behavior of aggregate inventories in the postwar U.S.  when aggregate fluctuations arise from technology, rather than preference, shocks.  The converse holds for the stockout avoidance model.  The (S,s) model performs well with respect to the inventory facts and other business cycle regularities.  By contrast, the essential risk motive in the stockout avoidance model is insufficient to generate inventory holdings near the data without destroying the model's performance elsewhere, suggesting a fundamental problem in using reduced-form inventory models with stocks rationalized by this motive"--Federal Reserve Bank of Minneapolis web site.
Notes: Also available in print.
Includes bibliographical references.
Title from PDF file as viewed on 11/10/2004.
System requirements: Adobe Acrobat Reader.
Mode of access: World Wide Web.