IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

Inventories and the Role of Goods-Market Frictions for Business Cycles

  • Wouter Den Haan

    ()

    (Centre for Macroeconomics (CFM))

Changes in the stock of inventories are important for fluctuations in aggregate output. However, the possibility that firms do not sell all produced goods and inventory accumulation are typically ignored in business cycle models. This paper captures this with a goods-market friction. Using US data, "goods-market efficiency" is shown to be strongly procyclical. By including both a goods-market friction and a standard labor-market search friction, the model developed can substantially magnify and propagate shocks. Despite its simplicity, the model can also replicate key inventory facts. However, when these inventory facts are used to discipline parameter values, then goods-market frictions are quantitatively not very important.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.centreformacroeconomics.ac.uk/Discussion-Papers/2014/CFMDP2014-02-Paper.pdf
Download Restriction: no

Paper provided by Centre for Macroeconomics (CFM) in its series Discussion Papers with number 1402.

as
in new window

Length: 53 pages
Date of creation: Jan 2014
Date of revision:
Handle: RePEc:cfm:wpaper:1402
Contact details of provider: Web page: http://www.centreformacroeconomics.ac.uk/

More information through EDIRC

References listed on IDEAS
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.:

as in new window
  1. repec:pri:cepsud:234kaplan is not listed on IDEAS
  2. Daniele Coen-Pirani, 2004. "Markups, Aggregation, and Inventory Adjustment," American Economic Review, American Economic Association, vol. 94(5), pages 1328-1353, December.
  3. Nicolas Petrovsky-Nadeau & Etienne Wasmer, 2014. "Macroeconomic Dynamics in a Model of Goods, Labor and Credit Market Frictions," Sciences Po Economics Discussion Papers 2014-09, Sciences Po Departement of Economics.
  4. Cooper,Russell, 1999. "Coordination Games," Cambridge Books, Cambridge University Press, number 9780521570176, Junio.
  5. Alessandro Gavazza, 2011. "The Role of Trading Frictions in Real Asset Markets," American Economic Review, American Economic Association, vol. 101(4), pages 1106-43, June.
  6. Alessandro Barattieri & Susanto Basu & Peter Gottschalk, 2010. "Some evidence on the importance of sticky wages," Working Papers 10-11, Federal Reserve Bank of Boston.
  7. Barbara Petrongolo & Christopher A. Pissarides, 2000. "Looking Into the Black Box: A Survey of the Matching Function," CEP Discussion Papers dp0470, Centre for Economic Performance, LSE.
  8. Den Haan, Wouter & Kaltenbrunner, Georg, 2007. "Anticipated Growth and Business Cycles in Matching Models," CEPR Discussion Papers 6063, C.E.P.R. Discussion Papers.
  9. van Ours, J.C. & Ridder, G., 1992. "Vacancies and recruitment of new employees," Other publications TiSEM 9acc708a-0885-46a2-aef5-7, Tilburg University, School of Economics and Management.
  10. Marcus Hagedorn & Iourii Manovskii, 2008. "The Cyclical Behavior of Equilibrium Unemployment and Vacancies Revisited," American Economic Review, American Economic Association, vol. 98(4), pages 1692-1706, September.
  11. repec:spo:wpecon:info:hdl:2441/5l6uh8ogmqildh09h481l2tb5 is not listed on IDEAS
  12. Garey Ramey & Wouter J. den Haan & Joel Watson, 2000. "Job Destruction and Propagation of Shocks," American Economic Review, American Economic Association, vol. 90(3), pages 482-498, June.
  13. den Haan, Wouter J. & Ramey, Garey & Watson, Joel, 1999. "Job Destruction and the Experiences of Displaced Workers," University of California at San Diego, Economics Working Paper Series qt1rd0w96t, Department of Economics, UC San Diego.
  14. Ramey, Valerie A, 1991. "Nonconvex Costs and the Behavior of Inventories," Journal of Political Economy, University of Chicago Press, vol. 99(2), pages 306-34, April.
  15. P. Diamond, 1980. "Aggregate Demand Management in Search Equilibrium," Working papers 268, Massachusetts Institute of Technology (MIT), Department of Economics.
  16. van Ours, Jan & Ridder, Geert, 1992. "Vacancies and the Recruitment of New Employees," Journal of Labor Economics, University of Chicago Press, vol. 10(2), pages 138-55, April.
  17. Emmanuel Saez & Pascal Michaillat, 2013. "A Theory of Aggregate Supply and Aggregate Demand as Functions of Market Tightness with Prices as Parameters," 2013 Meeting Papers 1216, Society for Economic Dynamics.
  18. Martin S. Eichenbaum, 1988. "Some Empirical Evidence on the Production Level and Production Cost Smoothing Models of Inventory Investment," NBER Working Papers 2523, National Bureau of Economic Research, Inc.
  19. Cooper,Russell, 1999. "Coordination Games," Cambridge Books, Cambridge University Press, number 9780521578967, Junio.
  20. 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.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:cfm:wpaper:1402. 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: (Martin Hannon)

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.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with 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 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.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.