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Seasonality, Cost Shocks, and the Production Smoothing Models of Inventories

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  • Miron, Jeffrey A
  • Zeldes, Stephen P

Abstract

This paper examines whether the negative assessment of the production smoothin g model of inventories in the existing literature is due to inadequat e treatment of cost shocks or seasonal fluctuations. The results of t he authors' empirical work provide a strong negative report on the pr oduction smoothing model, even when it includes cost shocks and seaso nal fluctuations. A striking piece of evidence is that in most indust ries the seasonal pattern in production is similar to the seasonal pa ttern in shipments, even after accounting for the seasonal movements in interest rates, input prices, and the weather. Copyright 1988 by The Econometric Society.

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  • Miron, Jeffrey A & Zeldes, Stephen P, 1988. "Seasonality, Cost Shocks, and the Production Smoothing Models of Inventories," Econometrica, Econometric Society, vol. 56(4), pages 877-908, July.
  • Handle: RePEc:ecm:emetrp:v:56:y:1988:i:4:p:877-908
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