Trade inventories
By: Jonathan McCarthy and Egon Zakrajsek.
Contributors: Zakrajsek, Egon.; Federal Reserve Bank of New York.
Series: Staff reports ;; no. 53; Staff reports (Federal Reserve Bank of New York : Online) ;; no. 53.
Publisher: Federal Reserve Bank of New York
Published: 1998
Place of publication: [New York, N.Y.]
Language: eng
Format: Electronic resource
Subjects: Business cycles -- United States -- Econometric models.; Inventories -- United States -- Econometric models.
Description: "We examine the behavior of trade inventories using both industry-level and high-frequency firm-level data.  The cost structure underlying the firm's optimization problem--convex delivery costs vs.  fixed costs of ordering--provides the two competing hypotheses.  In the presence of fixed costs (S,s) inventory policies are optimal, and steady-state reduced-form predictions regarding the dynamics of inventories and sales can be used to test the model.  The alternative of convex delivery costs is provided by structural estimation of a linear-quadratic (L-Q) model.  At the industry level, the results are consistent with the reduced-form predictions of the (S,s) model, and structural parameter estimates obtained from Euler equation estimation indicate that the L-Q model does not fit the data.  At the firm level, however, estimates of the structural cost parameters are economically plausible, statistically significant, and generate observationally equivalent dynamics of inventories and deliveries as those predicted by the steady-state reduced-form probability relationships derived from the (S,s) model"--Federal Reserve Bank of New York web site.
Notes: Includes bibliographical references.
Title from PDF file as viewed on 2/3/2005.
Also available in print.
System requirements: Adobe Acrobat Reader.
Mode of access: World Wide Web.