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Why Do Real and Nominal Inventory-Sales Ratios Have Different Trends?

  • Ramey, Valerie A
  • Vine, Daniel J

This note explains the diverging trends between real and nominal aggregate inventory-sales ratios. The combined effect of two features of the data explains the divergence. First, while aggregate sales include both goods and services, inventories include only goods. Second, there has been a strong secular decrease in the relative price of goods. The combination of these two factors causes the real and nominal aggregate inventory-sales ratios to have different trends.

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Article provided by Blackwell Publishing in its journal Journal of Money, Credit and Banking.

Volume (Year): 36 (2004)
Issue (Month): 5 (October)
Pages: 959-63

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Handle: RePEc:mcb:jmoncb:v:36:y:2004:i:5:p:959-63
Contact details of provider: Web page: http://www.blackwellpublishing.com/journal.asp?ref=0022-2879

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  1. James A. Kahn & Margaret M. McConnell & Gabriel Perez-Quiros, 2002. "On the causes of the increased stability of the U.S. economy," Economic Policy Review, Federal Reserve Bank of New York, issue May, pages 183-202.
  2. Irvine, F. Owen, 2003. "Long term trends in US inventory to sales ratios," International Journal of Production Economics, Elsevier, vol. 81(1), pages 27-39, January.
  3. Karl Whelan, 2000. "A guide to the use of chain aggregated NIPA data," Finance and Economics Discussion Series 2000-35, Board of Governors of the Federal Reserve System (U.S.).
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