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A note on inventories and commercial paper yields

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  • Nippani, Srinivas
  • Shwiff, Steven S.
  • Arize, Augustine C.
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    Abstract

    Winters [Winters, D. B. (October 2002) Commercial paper: A colossal market. The Federal Reserve Bank of St. Louis-National Economic Trends, Cover Page], shows that the amount of non-financial commercial paper outstanding is positively correlated to the amount of total business inventory. In this paper, we extend his work by showing that total business inventory has a significant impact on the non-financial commercial paper yields. We use regression analysis for studying the relationship between inventories and their impact on the spread between commercial paper and Treasury bills. Our results have implications for money market arbitrage, monetary policy, working capital management for corporations and stock valuation.

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    Bibliographic Info

    Article provided by Elsevier in its journal The Quarterly Review of Economics and Finance.

    Volume (Year): 49 (2009)
    Issue (Month): 2 (May)
    Pages: 711-719

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    Handle: RePEc:eee:quaeco:v:49:y:2009:i:2:p:711-719

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    Web page: http://www.elsevier.com/locate/inca/620167

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    Keywords: Inventories Commercial paper outstanding and Commercial paper yields;

    References

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    1. Pu Shen, 2003. "Why has the nonfinancial commercial paper market shrunk recently?," Economic Review, Federal Reserve Bank of Kansas City, issue Q I, pages 55-76.
    2. Benjamin M. Friedman & Kenneth N. Kuttner, 1993. "Economic Activity and the Short-term Credit Markets: An Analysis of Prices and Quantities," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 24(2), pages 193-284.
    3. Newey, Whitney & West, Kenneth, 2014. "A simple, positive semi-definite, heteroscedasticity and autocorrelation consistent covariance matrix," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 33(1), pages 125-132.
    4. Thomas K. Hahn, 1993. "Commercial paper," Economic Quarterly, Federal Reserve Bank of Richmond, issue Spr, pages 45-67.
    5. Benjamin M. Friedman & Kenneth N. Kuttner, 1994. "Why Does the Paper-Bill Spread Predict Real Economic Activity?," NBER Working Papers 3879, National Bureau of Economic Research, Inc.
    6. Ewing, Bradley T. & Lynch, Gerald J. & Payne, James E., 2003. "The paper-bill spread and real output: what matters more, a change in the paper rate or a change in the bill rate?," Review of Financial Economics, Elsevier, vol. 12(3), pages 233-246.
    7. Kashyap, Anil K & Stein, Jeremy C & Wilcox, David W, 1993. "Monetary Policy and Credit Conditions: Evidence from the Composition of External Finance," American Economic Review, American Economic Association, vol. 83(1), pages 78-98, March.
    8. Drew B. Winters, 2002. "Commercial paper: a colossal market," National Economic Trends, Federal Reserve Bank of St. Louis, issue Oct.
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