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What Drives Inventory Accumulation? News on Rates of Return and Marginal Costs

Author

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  • CHRISTOPH GÖRTZ
  • CHRISTOPHER GUNN
  • THOMAS A. LUBIK

Abstract

We study the determinants of inventory accumulation in a structural vector autoregression (VAR) framework with news shocks. Specifically, we investigate how news shocks affect two key determinants of inventory movements, namely, rates of return and marginal costs. We establish that inventories react strongly and positively to news about future increases in total factor productivity. We provide evidence that changes in external and internal rates of return are central to the transmission for such news shocks. We do not find evidence for a dominant role of marginal costs.

Suggested Citation

  • Christoph Görtz & Christopher Gunn & Thomas A. Lubik, 2025. "What Drives Inventory Accumulation? News on Rates of Return and Marginal Costs," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 57(7), pages 1907-1929, October.
    • Handle: RePEc:wly:jmoncb:v:57:y:2025:i:7:p:1907-1929
    DOI: 10.1111/jmcb.13197
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    Cited by:

    1. is not listed on IDEAS
    2. Sedjro Aaron Alovokpinhou & Christopher Malikane & Tshepo Mokoka, 2022. "Inventory dynamics and endogenous persistence in a new Keynesian model," Applied Economics, Taylor & Francis Journals, vol. 54(17), pages 1957-1973, April.
    3. repec:rim:rimwps:21-26 is not listed on IDEAS
    4. Görtz, Christoph & Gunn, Christopher & Lubik, Thomas A., 2022. "Is there news in inventories?," Journal of Monetary Economics, Elsevier, vol. 126(C), pages 87-104.
    5. Christoph Gortz & Christopher Gunn & Thomas Lubik, 2022. "Split Personalities: The Changing Nature of Technology Shocks," Carleton Economic Papers 22-06, Carleton University, Department of Economics.

    More about this item

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies

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