Structural Instability and the Production-Smoothing Model of Inventories
AbstractThe production-smoothing model of inventories implies that inventories, labor inputs, sales, and factor input prices are cointegrated if sales and factor prices are I(1) with one cointegrating vector for each state variable held. These propositions are tested in six nondurable-goods industries. All industries provide evidence of cointegration. Fewer quasi-fixed factors are found than previous research often assumed. Estimates of cointegrating vectors provide implausible parameter estimates. Rank stability tests, with fixed or sequentially chosen breakpoints, indicate that the cointegrating matrix has unstable rank. Parameter estimates of cointegrating vectors do not provide much support for the production-smoothing model of inventories.
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Bibliographic InfoArticle provided by American Statistical Association in its journal Journal of Business and Economic Statistics.
Volume (Year): 16 (1998)
Issue (Month): 2 (April)
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Web page: http://www.amstat.org/publications/jbes/index.cfm?fuseaction=main
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- Louis J. Maccini & Bartholomew Moore & Huntley Schaller, 2013. "Inventory Behavior with Permanent Sales Shocks," Fordham Economics Discussion Paper Series dp2013-03, Fordham University, Department of Economics.
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- Louis J. Maccini & Bartholomew J. Moore & Huntley Schaller, 2004.
"The Interest Rate, Learning, and Inventory Investment,"
American Economic Review,
American Economic Association, vol. 94(5), pages 1303-1327, December.
- Bartholomew Moore & Louis J Maccini & Huntley Schaller, 2002. "The Interest Rate Learning and Inventory Investment," Economics Working Paper Archive 512, The Johns Hopkins University,Department of Economics, revised Apr 2004.
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