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Seasonality, Cost Shocks, and the Production Smoothing Models of Inventories

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Author Info
Miron, Jeffrey A
Zeldes, Stephen P

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Abstract

This paper examines whether the negative assessment of the production smoothin g model of inventories in the existing literature is due to inadequat e treatment of cost shocks or seasonal fluctuations. The results of t he authors' empirical work provide a strong negative report on the pr oduction smoothing model, even when it includes cost shocks and seaso nal fluctuations. A striking piece of evidence is that in most indust ries the seasonal pattern in production is similar to the seasonal pa ttern in shipments, even after accounting for the seasonal movements in interest rates, input prices, and the weather. Copyright 1988 by The Econometric Society.

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Publisher Info
Article provided by Econometric Society in its journal Econometrica.

Volume (Year): 56 (1988)
Issue (Month): 4 (July)
Pages: 877-908
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Handle: RePEc:ecm:emetrp:v:56:y:1988:i:4:p:877-908

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Edward C. Prescott, 1986. "Theory ahead of business cycle measurement," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Fall, pages 9-22. [Downloadable!]
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  2. Blanchard, Olivier J, 1983. "The Production and Inventory Behavior of the American Automobile Industry," Journal of Political Economy, University of Chicago Press, vol. 91(3), pages 365-400, June. [Downloadable!] (restricted)
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  3. Lawrence J. Christiano & Martin S. Eichenbaum, 1986. "Temporal Aggregation and Structural Inference in Macroeconomics," NBER Technical Working Papers 0060, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  4. Andrew B. Abel, 1985. "Inventories, Stock-Outs, and Production Smoothing," NBER Working Papers 1563, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  5. Blinder, Alan S, 1986. "More on the Speed of Adjustment in Inventory Models," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 18(3), pages 355-65, August. [Downloadable!] (restricted)
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  6. Schutte, David P, 1983. "Inventories and Sticky Prices: Note," American Economic Review, American Economic Association, vol. 73(4), pages 815-16, September. [Downloadable!] (restricted)
  7. West, Kenneth D., 1983. "A note on the econometric use of constant dollar inventory series," Economics Letters, Elsevier, vol. 13(4), pages 337-341. [Downloadable!] (restricted)
  8. Maccini, Louis J & Rossana, Robert J, 1984. "Joint Production, Quasi-Fixed Factors of Production, and Investement in Finished Goods Inventories," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 16(2), pages 218-36, May. [Downloadable!] (restricted)
  9. Miron, Jeffrey A. & Zeldes, Stephen P., 1989. "Production, sales, and the change in inventories : An identity that doesn't add up," Journal of Monetary Economics, Elsevier, vol. 24(1), pages 31-51, July. [Downloadable!] (restricted)
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  10. Hansen, Lars Peter & Singleton, Kenneth J, 1983. "Stochastic Consumption, Risk Aversion, and the Temporal Behavior of Asset Returns," Journal of Political Economy, University of Chicago Press, vol. 91(2), pages 249-65, April. [Downloadable!] (restricted)
  11. Irvine, F Owen, Jr, 1981. "Retail Inventory Investment and the Cost of Capital," American Economic Review, American Economic Association, vol. 71(4), pages 633-48, September. [Downloadable!] (restricted)
  12. Goodfriend, Marvin, 1992. "Information-Aggregation Bias," American Economic Review, American Economic Association, vol. 82(3), pages 508-19, June. [Downloadable!] (restricted)
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  13. Stephen Zeldes, . "Consumption and Liquidity Constraints: An Empirical Investigation," Rodney L. White Center for Financial Research Working Papers 24-85, Wharton School Rodney L. White Center for Financial Research.
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  14. Mankiw, N. Gregory, 1981. "The permanent income hypothesis and the real interest rate," Economics Letters, Elsevier, vol. 7(4), pages 307-311. [Downloadable!] (restricted)
  15. Peter M. Garber & Robert G. King, 1983. "Deep Structral Excavation? A Critique of Euler Equation Methods," NBER Technical Working Papers 0031, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  16. Kahn, James A, 1987. "Inventories and the Volatility of Production," American Economic Review, American Economic Association, vol. 77(4), pages 667-79, September. [Downloadable!] (restricted)
  17. Blinder, Alan S, 1986. "Can the Production Smoothing Model of Inventory Behavior Be Saved?," The Quarterly Journal of Economics, MIT Press, vol. 101(3), pages 431-53, August. [Downloadable!] (restricted)
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  18. Ghali, Moheb A, 1987. "Seasonality, Aggregation and the Testing of the Production Smoothing Hypothesis," American Economic Review, American Economic Association, vol. 77(3), pages 464-69, June. [Downloadable!] (restricted)
  19. Blinder, Alan S. & Fischer, Stanley, 1981. "Inventories, rational expectations, and the business cycle," Journal of Monetary Economics, Elsevier, vol. 8(3), pages 277-304. [Downloadable!] (restricted)
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  20. West, Kenneth D, 1986. "A Variance Bounds Test of the Linear Quadratic Inventory Model," Journal of Political Economy, University of Chicago Press, vol. 94(2), pages 374-401, April. [Downloadable!] (restricted)
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  21. Sargent, Thomas J, 1978. "Rational Expectations, Econometric Exogeneity, and Consumption," Journal of Political Economy, University of Chicago Press, vol. 86(4), pages 673-700, August. [Downloadable!] (restricted)
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