Input and Output Inventories in the UK
AbstractWhat is the role of inventories in UK manufacturing? We present and estimate a model of inventories that considers separately finished goods and input (i.e. the sum of raw materials and work-in-process) inventories. We estimate structural parameters which allows us to make inferences on the role of inventories in cyclical frequencies. Our results suggest that both types of inventories are used for production level (from demand shocks) and production cost (from cost shocks) smoothing. We identify a small but significant negative relationship between inventories and the real interest rate thus providing support for one of the textbook channels of the monetary policy transmission mechanism. Variance decompositions indicate that technology shocks are the dominant driving factor behind cyclical changes in inventories. These shocks account for over 35% of the forecast error variance at these frequencies.
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Bibliographic InfoPaper provided by University of Nottingham, Centre for Finance, Credit and Macroeconomics (CFCM) in its series Discussion Papers with number 09/13.
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Inventories; Linear-quadratic model; Interest rates.;
Other versions of this item:
- John D. Tsoukalas, 2011. "Input and Output Inventories in the UK," Economica, London School of Economics and Political Science, London School of Economics and Political Science, vol. 78(311), pages 460-479, 07.
- E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Capital; Investment; Capacity
- E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
- C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
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.:
- Anindya BANERJEE & Paul MIZEN, 2003.
"A Re-interpretation of the Linear-Quadratic Model When Inventories and Sales are Polynomially Cointegrated,"
Economics Working Papers, European University Institute
ECO2003/11, European University Institute.
- Paul Mizen & Anindya Banerjee, 2006. "A re-interpretation of the linear quadratic model when inventories and sales are polynomially cointegrated," Journal of Applied Econometrics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 21(8), pages 1249-1264.
- Andrew Benito, 2005. "Financial Pressure, Monetary Policy Effects and Inventories: Firm-level Evidence from a Market-based and a Bank-based Financial System," Economica, London School of Economics and Political Science, London School of Economics and Political Science, vol. 72(286), pages 201-224, 05.
- Daniele Coen-Pirani, 2004. "Markups, Aggregation, and Inventory Adjustment," American Economic Review, American Economic Association, American Economic Association, vol. 94(5), pages 1328-1353, December.
- Simona Mateut & Paul Mizen & Ydriss Ziane, . "No Going Back: How the Production Process Affects Access to Short-term Credit," Discussion Papers, University of Nottingham, Centre for Finance, Credit and Macroeconomics (CFCM) 12/14, University of Nottingham, Centre for Finance, Credit and Macroeconomics (CFCM).
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