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Microeconomic Inventory Behavior and Aggregate Inventory Dynamics

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  • Daniele Coen-Pirani

Abstract

The slow adjustment of inventory stocks to changes in sales has been a puzzle for the inventory literature since at least Auerbach and Feldstein (1976). Recent evidence suggests that estimated firm-level adjustment speeds of inventory stocks are significantly higher than estimates based on aggregate data. This paper investigates the circumstances under which such bias occurs using an industry equilibrium model where, consistently with empirical evidence, some firms smooth production while others bunch it. The model can account for the significant downward bias documented empirically when a subset of firms displays countercyclical mark-up movements.

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File URL: https://student-3k.tepper.cmu.edu/gsiadoc/wp/2003-E28.pdf
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Bibliographic Info

Paper provided by Carnegie Mellon University, Tepper School of Business in its series GSIA Working Papers with number 2003-E28.

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Date of creation: Oct 2003
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Handle: RePEc:cmu:gsiawp:1197727665

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Postal: Tepper School of Business, Carnegie Mellon University, 5000 Forbes Avenue, Pittsburgh, PA 15213-3890
Web page: http://www.tepper.cmu.edu/

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Web: http://student-3k.tepper.cmu.edu/gsiadoc/GSIA_WP.asp

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Cited by:
  1. Aubhik Khan & Julia K. Thomas, 2002. "Inventories and the business cycle: an equilibrium analysis of (S,s) policies," Working Papers 02-20, Federal Reserve Bank of Philadelphia.
  2. Aubhik Khan & Julia K. Thomas, 2004. "Modeling inventories over the business cycle," Staff Report 343, Federal Reserve Bank of Minneapolis.

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