Advanced Search
MyIDEAS: Login to save this paper or follow this series

Has Inventory Investment Been Liquidity-Constrained? Evidence From U.S. Panel Data

Contents:

Author Info

  • Yungsan Kim
  • Woon Gyu Choi

Abstract

Based on an analysis of high-frequency panel data for U.S. firms, this paper finds that inventory investment has been liquidity-constrained in most periods during 1975-97, but less so, or not at all, during recessions. This result can be justified on the grounds that inventory fluctuations are largely attributable to unexpected sales shocks, and that firms increase liquid assets before recessions. Moreover, this results holds irrespective of whether the firm has a bond rating, contrary to the finding of Kashyap, Lamont, and Stein (1994) that inventory investment is liquidity-constrained during recessions only for firms without bond ratings.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.imf.org/external/pubs/cat/longres.aspx?sk=15294
Download Restriction: no

Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 01/122.

as in new window
Length: 41
Date of creation: 01 Aug 2001
Date of revision:
Handle: RePEc:imf:imfwpa:01/122

Contact details of provider:
Postal: International Monetary Fund, Washington, DC USA
Phone: (202) 623-7000
Fax: (202) 623-4661
Email:
Web page: http://www.imf.org/external/pubind.htm
More information through EDIRC

Order Information:
Web: http://www.imf.org/external/pubs/pubs/ord_info.htm

Related research

Keywords: Monetary policy; inventories; inventory; bond; cash flow; bond ratings; liquid asset; financial markets; cash flows; bond market access; bond market; bond rating; hedge; inventory management; aggregate inventories; stock exchanges; bonds; stock-flow identities; stock exchange; financial safety net; financial assets;

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Christiano, Lawrence J., 1988. "Why does inventory investment fluctuate so much?," Journal of Monetary Economics, Elsevier, Elsevier, vol. 21(2-3), pages 247-280.
  2. Ben S. Bernanke & Mark Gertler, 1995. "Inside the Black Box: The Credit Channel of Monetary Policy Transmission," NBER Working Papers 5146, National Bureau of Economic Research, Inc.
  3. Krane, Spencer D & Braun, Stephen N, 1991. "Production Smoothing Evidence from Physical-Product Data," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 99(3), pages 558-81, June.
  4. Eichenbaum, Martin, 1989. "Some Empirical Evidence on the Production Level and Production Cost Smoothing Models of Inventory Investment," American Economic Review, American Economic Association, American Economic Association, vol. 79(4), pages 853-64, September.
  5. Maccini, Louis J & Rossana, Robert J, 1981. "Investment in Finished Goods Inventories: An Analysis of Adjustment Speeds," American Economic Review, American Economic Association, American Economic Association, vol. 71(2), pages 17-22, May.
  6. Blinder, Alan S, 1986. "Can the Production Smoothing Model of Inventory Behavior Be Saved?," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 101(3), pages 431-53, August.
  7. Robert E. Carpenter & Steven M. Fazzari & Bruce C. Petersen, 1994. "Inventory Investment, Internal-Finance Fluctuation, and the Business Cycle," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 25(2), pages 75-138.
  8. Ben S. Bernanke & Alan S. Blinder, 1989. "The federal funds rate and the channels of monetary transmission," Working Papers 89-10, Federal Reserve Bank of Philadelphia.
  9. Steven M. Fazzari & R. Glenn Hubbard & BRUCE C. PETERSEN, 1988. "Financing Constraints and Corporate Investment," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 19(1), pages 141-206.
  10. Olivier J. Blanchard, 1982. "The Production and Inventory Behavior of the American Automobile Industry," NBER Working Papers 0891, National Bureau of Economic Research, Inc.
  11. Mark Gertler & Simon Gilchrist, 1993. "Monetary policy, business cycles and the behavior of small manufacturing firms," Finance and Economics Discussion Series, Board of Governors of the Federal Reserve System (U.S.) 93-4, Board of Governors of the Federal Reserve System (U.S.).
  12. Toni M. Whited, 1990. "Debt, liquidity constraints, and corporate investment: evidence from panel data," Finance and Economics Discussion Series, Board of Governors of the Federal Reserve System (U.S.) 114, Board of Governors of the Federal Reserve System (U.S.).
  13. Robert S. Pindyck, 1994. "Inventories and the Short-Run Dynamics of Commodity Prices," RAND Journal of Economics, The RAND Corporation, vol. 25(1), pages 141-159, Spring.
  14. Kashyap, Anil K & Lamont, Owen A & Stein, Jeremy C, 1994. "Credit Conditions and the Cyclical Behavior of Inventories," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 109(3), pages 565-92, August.
  15. Anil K Kashyap & Jeremy C. Stein & David W. Wilcox, 1992. "Monetary Policy and Credit Conditions: Evidence From the Composition of External Finance," NBER Working Papers 4015, National Bureau of Economic Research, Inc.
  16. Ramey, Valerie, 1993. "How important is the credit channel in the transmission of monetary policy?," Carnegie-Rochester Conference Series on Public Policy, Elsevier, Elsevier, vol. 39(1), pages 1-45, December.
  17. Clarida, R. & Gali, J. & Gertler, M., 1999. "The Science of Monetary Policy: A New Keynesian Perspective," Working Papers, C.V. Starr Center for Applied Economics, New York University 99-13, C.V. Starr Center for Applied Economics, New York University.
  18. Benjamin M. Friedman & Kenneth N. Kuttner, 1993. "Economic activity and the short-term credit markets: an analysis of prices and quantities," Working Paper Series, Macroeconomic Issues, Federal Reserve Bank of Chicago 93-17, Federal Reserve Bank of Chicago.
  19. Kahn, James A, 1992. "Why Is Production More Volatile Than Sales? Theory and Evidence on the Stockout-Avoidance Motive for Inventory-Holding," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 107(2), pages 481-510, May.
  20. Woon Gyu Choi & Seonghwan Oh, 2000. "Endogenous Money Supply and Money Demand," IMF Working Papers 00/188, International Monetary Fund.
  21. Bernanke, Ben & Gertler, Mark & Gilchrist, Simon, 1994. "The Financial Accelerator and the Flight to Quality," Working Papers, C.V. Starr Center for Applied Economics, New York University 94-24, C.V. Starr Center for Applied Economics, New York University.
  22. Kydland, Finn E & Prescott, Edward C, 1982. "Time to Build and Aggregate Fluctuations," Econometrica, Econometric Society, Econometric Society, vol. 50(6), pages 1345-70, November.
  23. Mark Bils & James A. Kahn, 1999. "What inventory behavior tells us about business cycles," Staff Reports, Federal Reserve Bank of New York 92, Federal Reserve Bank of New York.
  24. Donald S. Allen, 1995. "Changes in inventory management and the business cycle," Review, Federal Reserve Bank of St. Louis, Federal Reserve Bank of St. Louis, issue Jul, pages 17-26.
  25. Kenneth D. West, 1989. "The Sources of Fluctuations in Aggregate Inventories and GNP," NBER Working Papers 2992, National Bureau of Economic Research, Inc.
  26. Durlauf, S.N. & Maccini, L.J., 1993. "Measuring Noise in Inventory Models," Working papers, Wisconsin Madison - Social Systems 9326, Wisconsin Madison - Social Systems.
  27. Donald P. Morgan, 2000. "Bank commitment relationships, cash flow constraints, and liquidity management," Staff Reports, Federal Reserve Bank of New York 108, Federal Reserve Bank of New York.
  28. Feenstra, Robert C., 1986. "Functional equivalence between liquidity costs and the utility of money," Journal of Monetary Economics, Elsevier, Elsevier, vol. 17(2), pages 271-291, March.
  29. Woon Gyu Choi & Yungsan Kim, 2001. "Monetary Policy and Corporate Liquid Asset Demand," IMF Working Papers 01/177, International Monetary Fund.
  30. Lawrence J. Christiano & Martin Eichenbaum & Charles Evans, 1994. "The effects of monetary policy shocks: evidence from the flow of funds," Proceedings, Federal Reserve Bank of Dallas, Federal Reserve Bank of Dallas, issue Apr.
  31. Michael C. Lovell, 1959. "Manufacturers' Inventories, Sales Expectations, and the Acceleration Principle," Cowles Foundation Discussion Papers, Cowles Foundation for Research in Economics, Yale University 86, Cowles Foundation for Research in Economics, Yale University.
  32. Taylor, John B., 1993. "Discretion versus policy rules in practice," Carnegie-Rochester Conference Series on Public Policy, Elsevier, Elsevier, vol. 39(1), pages 195-214, December.
  33. Andreas Hornstein, 1998. "Inventory investment and the business cycle," Economic Quarterly, Federal Reserve Bank of Richmond, Federal Reserve Bank of Richmond, issue Spr, pages 49-71.
  34. Alan S. Blinder & Louis J. Maccini, 1991. "Taking Stock: A Critical Assessment of Recent Research on Inventories," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 5(1), pages 73-96, Winter.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. John J. HEIM, 2009. "U. S. Demand For Different Types Of Imported And Domestic Investment Goods," Applied Econometrics and International Development, Euro-American Association of Economic Development, Euro-American Association of Economic Development, vol. 9(2).
  2. Choi, Woon Gyu & Wen, Yi, 2000. "Measuring Interest Rates as Determined by Thrift and Productivity," Working Papers, Cornell University, Center for Analytic Economics 00-03, Cornell University, Center for Analytic Economics.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:imf:imfwpa:01/122. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jim Beardow) or (Hassan Zaidi).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.