Title: Production and inventory behavior of capital
Description: "This paper provides a dynamic optimization model of durable good inventories to study the interactions between investment demand and production of capital goods.  There are three major findings: First, capital suppliers' inventory behavior makes investment demand more volatile in equilibrium; Second, equilibrium price of capital is characterized by downward stickiness; Third, the responses of the capital market to interest rate and other environmental changes are asymmetric.  All are the results of equilibrium interactions between demand and supply"--Federal Reserve Bank of St. Louis web site.
Subjects: Capital investments, Supply and demand