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Inventories and real rigidities in New Keynesian business cycle models

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  • Kryvtsov, Oleksiy
  • Midrigan, Virgiliu

Abstract

Kryvtsov and Midrigan (2008) study the behavior of inventories in an economy with menu costs, fixed ordering costs and the possibility of stockouts. This paper extends their analysis to a richer setting that is capable of more closely accounting for the dynamics of the US business cycle. We find that the original conclusion survives in this setting: namely, the model requires an elasticity of real marginal cost to output approximately equal to the inverse intertemporal elasticity of substitution in consumption in order to account for the countercyclicality of the aggregate inventory-to-sales ratio in the data.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of the Japanese and International Economies.

Volume (Year): 24 (2010)
Issue (Month): 2 (June)
Pages: 259-281

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Handle: RePEc:eee:jjieco:v:24:y:2010:i:2:p:259-281

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Web page: http://www.elsevier.com/locate/inca/622903

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Keywords: Inventories Calvo pricing Real rigidities;

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References

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Citations

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Cited by:
  1. repec:mar:magkse:201123 is not listed on IDEAS
  2. Thomas A. Lubik & Wing Leong Teo, 2009. "Inventories and Optimal Monetary Policy," School of Economics Working Papers 2009-33, University of Adelaide, School of Economics.
  3. Virgiliu Midrigan & Oleksiy Kryvtsov, 2008. "Inventories, Markups, and Real Rigidities in Menu Cost Models," 2008 Meeting Papers 487, Society for Economic Dynamics.
  4. Lubik, Thomas A. & Teo, Wing Leong, 2012. "Inventories, inflation dynamics and the New Keynesian Phillips curve," European Economic Review, Elsevier, vol. 56(3), pages 327-346.
  5. Oleksiy Kryvtsov & Virgiliu Midrigan, 2011. "Inventories, Markups and Real Rigidities in Sticky Price Models of the Canadian Economy," Working Papers 11-9, Bank of Canada.
  6. Hyunseung Oh & Nicolas Crouzet, 2013. "Can news shocks account for the business-cycle dynamics of inventories?," 2013 Meeting Papers 504, Society for Economic Dynamics.

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