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Inventory Investment Dynamics and Recoveries: A Comparison of Manufacturing and Retail Trade Sectors

Author

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  • Frederique Bec

    (Cergy-Pontoise University, THEMA, CREST-ENSAE, Banque de France)

  • Marie Bessec

    (Banque de France, DGEI-DCPM-DIACONJ, Paris-Dauphine University, LEDa-CGEMP)

Abstract

This paper explores the existence of a bounce-back effect in inventory investment using the European Commission opinion survey on stocks of finished products in manufacturing and retail trade sectors for France, Germany and a European aggregate, from 1985q1 to 2011q4. Our empirical findings support the existence of a high recovery episode for inventory investment, during the quarters immediately following the recessions: it occurs later and lasts longer in manufacturing than in retail trade sector. Since a third phase of rapid recovery has not been found in final sales data so far, the rebound in inventories could in turn explain the GDP growth bounce-back pointed out in previous empirical studies. This calls for a careful modeling of the inventory investment behavior in any sensible theoretical explanation of aggregate business cycles.

Suggested Citation

  • Frederique Bec & Marie Bessec, 2013. "Inventory Investment Dynamics and Recoveries: A Comparison of Manufacturing and Retail Trade Sectors," Economics Bulletin, AccessEcon, vol. 33(3), pages 2209-2222.
    • Handle: RePEc:ebl:ecbull:eb-12-00507
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    References listed on IDEAS

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    More about this item

    Keywords

    Threshold auto-regression; bounce-back effects; business cycles; inventory investment;
    All these keywords.

    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables

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