A re-interpretation of the linear quadratic model when inventories and sales are polynomially cointegrated
Estimation of the linear quadratic model, the workhorse of the inventory literature, traditionally takes inventories and sales to be first-difference stationary series, and the ratio of the two variables to be stationary. However, these assumptions do not always match the properties of the data for the last two decades in the United States. We propose a model that allows for the non-stationary characteristics of the data, using polynomial cointegration. We show that the closed-form solution has other recent models as special cases. The resulting model performs well on aggregate and disaggregated data. Copyright © 2006 John Wiley & Sons, Ltd.
Volume (Year): 21 (2006)
Issue (Month): 8 ()
|Contact details of provider:|| Web page: http://www.interscience.wiley.com/jpages/0883-7252/|
|Order Information:|| Web: http://www3.interscience.wiley.com/jcatalog/subscribe.jsp?issn=0883-7252 Email: |
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.:
- Peter C.B. Phillips, 1985.
"Time Series Regression with a Unit Root,"
Cowles Foundation Discussion Papers
740R, Cowles Foundation for Research in Economics, Yale University, revised Feb 1986.
- Rahbek, Anders & Christian Kongsted, Hans & Jorgensen, Clara, 1999.
"Trend stationarity in the I(2) cointegration model,"
Journal of Econometrics,
Elsevier, vol. 90(2), pages 265-289, June.
- Clara Jørgensen & Hans Christian Kongsted & Anders Rahbek, 1996. "Trend-Stationarity in the I(2) Cointegration Model," Discussion Papers 96-12, University of Copenhagen. Department of Economics.
- Dolado, J. & Galbraith, J.W. & Banerjee, A., 1991.
"Estimating Intertemporal Quadratic Adjustment Cost Models with Integrated Series,"
Economics Series Working Papers
99111, University of Oxford, Department of Economics.
- Dolado, Juan & Galbraith, John W & Banerjee, Anindya, 1991. "Estimating Intertemporal Quadratic Adjustment Cost Models with Integrated Series," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 32(4), pages 919-936, November.
- Engsted, Tom & Haldrup, Niels, 1999. " Multicointegration in Stock-Flow Models," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(2), pages 237-254, May.
- Engsted, Tom & Haldrup, Niels, 1994. "The Linear Quadratic Adjustment Cost Model and the Demand for Labour," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 9(S), pages S145-59, Suppl. De.
- Niels Haldrup, 1998. "An Econometric Analysis of I(2) Variables," Journal of Economic Surveys, Wiley Blackwell, vol. 12(5), pages 595-650, December.
- Paruolo, Paolo, 1996. "On the determination of integration indices in I(2) systems," Journal of Econometrics, Elsevier, vol. 72(1-2), pages 313-356.
- Alan S. Blinder & Louis J. Maccini, 1991. "Taking Stock: A Critical Assessment of Recent Research on Inventories," Journal of Economic Perspectives, American Economic Association, vol. 5(1), pages 73-96, Winter.
When requesting a correction, please mention this item's handle: RePEc:jae:japmet:v:21:y:2006:i:8:p:1249-1264. 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: (Wiley-Blackwell Digital Licensing)or (Christopher F. Baum)
If references are entirely missing, you can add them using this form.