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|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.bos.frb.org/
More information through EDIRC
|Order Information:|| Email: |
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.:
- Kim, Chang-Jin & Nelson, Charles R & Piger, Jeremy, 2004.
"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.
- Chang-Jin Kim & Charles Nelson & Jeremy M. Piger, 2003. "The less volatile U.S. economy: a Bayesian investigation of timing, breadth, and potential explanations," Working Papers 2001-016, Federal Reserve Bank of St. Louis.
- Chang-Jin Kim & Charles Nelson & Jeremy Piger, 2001. "The less volatile U.S. economy: a Bayesian investigation of timing, breadth, and potential explanations," International Finance Discussion Papers 707, Board of Governors of the Federal Reserve System (U.S.).
- Valerie A. Ramey & Daniel J. Vine, 2005.
"Tracking the source of the decline in GDP volatility: an analysis of the automobile industry,"
Finance and Economics Discussion Series
2005-14, Board of Governors of the Federal Reserve System (U.S.).
- Valerie A. Ramey & Daniel J. Vine, 2004. "Tracking the Source of the Decline in GDP Volatility: An Analysis of the Automobile Industry," NBER Working Papers 10384, National Bureau of Economic Research, Inc.
- Humphreys, Brad R. & Maccini, Louis J. & Schuh, Scott, 2001.
"Input and output inventories,"
Journal of Monetary Economics,
Elsevier, vol. 47(2), pages 347-375, April.
- 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.
- Brad R Humphreys & Louis J Maccini & Scott Schuh, 1997. "Input and Output Inventories," Economics Working Paper Archive 391, The Johns Hopkins University,Department of Economics.
- Brad R. Humphreys & Louis J. Maccini & Scott Schuh, 1997. "Input and output inventories," Working Papers 97-7, Federal Reserve Bank of Boston.
- Chang-Jin Kim & Charles R. Nelson, 1999. "Has The U.S. Economy Become More Stable? A Bayesian Approach Based On A Markov-Switching Model Of The Business Cycle," The Review of Economics and Statistics, MIT Press, vol. 81(4), pages 608-616, November.
- James A. Kahn & Margaret M. McConnell, 2002. "Has inventory volatility returned? A look at the current cycle," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 8(May).
- James H. Stock & Mark W. Watson, 2003.
"Has the Business Cycle Changed and Why?,"
in: NBER Macroeconomics Annual 2002, Volume 17, pages 159-230
National Bureau of Economic Research, Inc.
- Olivier Blanchard & John Simon, 2001. "The Long and Large Decline in U.S. Output Volatility," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 32(1), pages 135-174.
- 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.
- 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).
- 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.).
When requesting a correction, please mention this item's handle: RePEc:fip:fedbwp:02-6. 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: (Catherine Spozio)
If references are entirely missing, you can add them using this form.