Title: Input and output inventory dynamics
Description: "This paper develops an analytically tractable general equilibrium model of inventory dynamics.  Inventories are introduced into a standard RBC model through a precautionary stockout-avoidance motive.  Under persistent aggregate demand shocks, the model is broadly consistent with the U.S.  business cycle and key features of inventory behavior, including (i) a large inventory stock-to-sales ratio and a small inventory investment-to-sales ratio in the long run, (ii) excess volatility of production relative to sales, (iii) procyclical inventory investment but countercyclical stock-to-sales ratio over the business cycle, and (iv) more volatile input inventories than output inventories.  Similar results can also be obtained under persistent aggregate supply shocks"--Federal Reserve Bank of St. Louis web site.