Inventory investment and output volatility
This paper reports the results of a detailed examination of the hypothesis that improved inventory management and production techniques are responsible for the decline in the volatility of U.S. GDP growth. Our innovations are to look at the data at a finer level of disaggregation than previous studies, to exploit cross-sectional heterogeneity to obtain clearer identification of this hypothesis, and to provide a complete accounting of the change in GDP volatility. Changes in inventory behavior can account directly for only up to half of the total reduction in GDP volatility. Cross-section evidence from the manufacturing and trade sector indicates that change in the covariance structure among industries accounts for most of the remaining portion of the reduction in GDP volatility. Sales have become less correlated among industries and inventory investment has become more correlated. These distinctive changes in co-movement of industries suggest that development and management of supply chains may be an indirect channel through which changes in inventory management and production techniques have influenced GDP volatility.
|Date of creation:||2002|
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- Humphreys, Brad R. & Maccini, Louis J. & Schuh, Scott, 2001.
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- Brad R Humphreys & Louis J Maccini & Scott Schuh, 2000. "Input and Output Inventories," Economics Working Paper Archive 426, The Johns Hopkins University,Department of Economics.
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Finance and Economics Discussion Series
2005-14, Board of Governors of the Federal Reserve System (U.S.).
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in: NBER Macroeconomics Annual 2002, Volume 17, pages 159-230
National Bureau of Economic Research, Inc.
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"A guide to the use of chain aggregated NIPA data,"
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"The Less-Volatile U.S. Economy: A Bayesian Investigation of Timing, Breadth, and Potential Explanations,"
Journal of Business & Economic Statistics,
American Statistical Association, vol. 22(1), pages 80-93, January.
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- Margaret M. McConnell & Patricia C. Mosser & Gabriel Perez Quiros, 1999. "A decomposition of the increased stability of GDP growth," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 5(Aug).
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