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Why Do Real and Nominal Inventory-Sales Ratios Have Different Trends

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Author Info
Valerie A. Ramey
Daniel J. Vine

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Abstract

This note explains the diverging trends between real and nominal aggregate inventory-sales ratios. The combined effect of two features of the data explains the divergence. First, while aggregate sales include both goods and services, inventories include only goods. Second, there has been a strong secular decrease in the relative price of goods. The combination of these two factors causes the real and nominal aggregate inventory-sales ratios to have different trends.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 10703.

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Date of creation: Aug 2004
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Handle: RePEc:nbr:nberwo:10703

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E22 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Capital; Investment; Capacity

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  1. Oleksiy Kryvtsov & Virgiliu Midrigan, 2009. "Inventories, Markups, and Real Rigidities in Menu Cost Models," Working Papers 09-6, Bank of Canada. [Downloadable!]
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  2. Matteo Iacoviello & Fabio Schiantarelli & Scott Schuh, 2007. "Input and output inventories in general equilibrium," Working Papers 07-16, Federal Reserve Bank of Boston. [Downloadable!]
    Other versions:
  3. Yongseung Jung & Tack Yun, 2005. "Monetary policy shocks, inventory dynamics, and price-setting behavior," Working Paper Series 2006-02, Federal Reserve Bank of San Francisco. [Downloadable!]
  4. Aubhik Khan & Julia K. Thomas, 2004. "Modeling inventories over the business cycle," Staff Report 343, Federal Reserve Bank of Minneapolis. [Downloadable!]
    Other versions:
  5. Valerie A. Ramey & Daniel J. Vine, 2005. "Tracking the source of the decline in GDP volatility: an analysis of the automobile industry," Finance and Economics Discussion Series 2005-14, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
    Other versions:
  6. Adam Fein, 2004. "The Myth of Decline: A New Perspective on the Supply Chain and Changing Inventory-Sales Ratios," Working Papers 04-18, Center for Economic Studies, U.S. Census Bureau, revised Feb 2005. [Downloadable!]
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