Still More on the Speed of Adjustment in Inventory Models: A Lesson in Aggregation
AbstractApplied econometric research has been troubled by the fact that estimated adjustment speeds from stock-adjustment models of inventory investment turn out to be "implausibly slow." The paper presents new empirical evidence using business-survey data collected by the IFO Institute Munich, Germany. It is shown empirically that there is no such a thing as an "implausibly slow" adjustment speed if estimation is done at the same level of aggregation as is requested by the underlying microeconomic theory, that is, at the level of the individual firm. Slow adjustment speeds turn out to be an artifact due to aggregation.
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Bibliographic InfoArticle provided by Springer in its journal Empirical Economics.
Volume (Year): 18 (1993)
Issue (Month): 1 ()
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- Knetsch, Thomas A., 2004. "The Inventory Cycle of the German Economy," Discussion Paper Series 1: Economic Studies 2004,09, Deutsche Bundesbank, Research Centre.
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