IDEAS home Printed from https://ideas.repec.org/a/jae/japmet/v8y1993i3p295-306.html
   My bibliography  Save this article

The Long-Run Implications of the Production Smoothing Model of Inventories: An Empirical Test

Author

Listed:
  • Rossana, R J

Abstract

This paper provides an empirical test of the long-run implications of the production smoothing model of inventories, the dominant framework for inventory investment research in the past. Intertemporal models of a firm holding inventories of finished goods predict a long-run relationship between inventories, shipments, factor input prices, and the real interest rate which is tested here using cointegration test procedures. These tests provide little support for the predictions of the production smoothing model. In most of the data sets used, test statistics indicate that inventories, shipments, factor input prices, the nominal interest rate, and the inflation rate maintain a long-run equilibrium relationship but parameter estimates of cointegrating vectors are often implausible, typically rejecting hypotheses implied by structural models of the production smoothing motive for holding inventories. Copyright 1993 by John Wiley & Sons, Ltd.

Suggested Citation

  • Rossana, R J, 1993. "The Long-Run Implications of the Production Smoothing Model of Inventories: An Empirical Test," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 8(3), pages 295-306, July-Sept.
  • Handle: RePEc:jae:japmet:v:8:y:1993:i:3:p:295-306
    as

    Download full text from publisher

    File URL: http://links.jstor.org/sici?sici=0883-7252%28199307%2F199309%298%3A3%3C295%3ATLIOTP%3E2.0.CO%3B2-K&origin=bc
    File Function: full text
    Download Restriction: Access to full text is restricted to JSTOR subscribers. See http://www.jstor.org for details.

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Maccini, Louis J. & Moore, Bartholomew & Schaller, Huntley, 2015. "Inventory behavior with permanent sales shocks," Journal of Economic Dynamics and Control, Elsevier, vol. 53(C), pages 290-313.
    2. Kenneth D. West, 1993. "Inventory Models," NBER Technical Working Papers 0143, National Bureau of Economic Research, Inc.
    3. Louis J. Maccini & Bartholomew J. Moore & Huntley Schaller, 2004. "The Interest Rate, Learning, and Inventory Investment," American Economic Review, American Economic Association, vol. 94(5), pages 1303-1327, December.
    4. Ramey, Valerie A. & West, Kenneth D., 1999. "Inventories," Handbook of Macroeconomics,in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 13, pages 863-923 Elsevier.
    5. Kelle, Peter & Milne, Alistair, 1999. "The effect of (s, S) ordering policy on the supply chain," International Journal of Production Economics, Elsevier, vol. 59(1-3), pages 113-122, March.
    6. Peeters, H. M. M., 1997. "The (mis-)specification of production costs in production smoothing models," Economics Letters, Elsevier, vol. 57(1), pages 69-77, November.
    7. Carine Bouthevillain & Didier Eyssartier, 1997. "Le rôle des variations de stocks dans les cycles d'activité des principaux pays industrialisés," Revue de l'OFCE, Programme National Persée, vol. 62(1), pages 151-202.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:jae:japmet:v:8:y:1993:i:3:p:295-306. 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). General contact details of provider: http://www.interscience.wiley.com/jpages/0883-7252/ .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.