Production smoothing evidence from physical-product data
AbstractThe authors reconsider the paradox that the variance of production often exceeds the variance of shipments, a result that casts doubt on the production smoothing model of inventory behavior. Most studies of production smoothing have analyzed two-digit SIC dollar-value data from Commerce Department surveys. In contrast, this paper reexamines disaggregated physical-product data and finds that production is smoother than shipments in about two-thirds of the thirty-eight industry or product groupings considered. However, doubts about the model persist; most notably, Euler equation estimates of the model's cost parameters are usually imprecise and often do not have the signs postulated by production smoothing models. Copyright 1991 by University of Chicago Press.
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Bibliographic InfoPaper provided by Board of Governors of the Federal Reserve System (U.S.) in its series Working Paper Series / Economic Activity Section with number 103.
Date of creation: 1990
Date of revision:
Other versions of this item:
- Krane, Spencer D & Braun, Stephen N, 1991. "Production Smoothing Evidence from Physical-Product Data," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 558-81, June.
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