IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Inventory Behavior with Permanent Sales Shocks

  • Louis J. Maccini

    (Johns Hopkins University)

  • Bartholomew Moore

    (Fordham University)

  • Huntley Schaller

    (Carleton University)

Empirically, sales are I(1). Starting from this fact, we derive three startling results. First, the variance of production is equal to the variance of sales in the long run. Second, this result holds regardless of the strength of production smoothing, stockout avoidance, or cost shocks. Third, at business cycle horizons, the conditional variance of production is greater than that of sales. We explain -- analytically and intuitively -- four traditional inventory puzzles and three puzzles about inventories and monetary policy.

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://legacy.fordham.edu/images/academics/graduate_schools/gsas/economics/DP2013_03_Maccini_Moore_Schaller.pdf
Download Restriction: no

Paper provided by Fordham University, Department of Economics in its series Fordham Economics Discussion Paper Series with number dp2013-03.

as
in new window

Length:
Date of creation: 2013
Date of revision:
Handle: RePEc:frd:wpaper:dp2013-03
Contact details of provider: Web page: http://www.fordham.edu/economics/
Email:


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. 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.
  2. Ben S. Bernanke & Mark Gertler, 1995. "Inside the Black Box: The Credit Channel of Monetary Policy Transmission," NBER Working Papers 5146, National Bureau of Economic Research, Inc.
  3. 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.
  4. Blanchard, Olivier J, 1983. "The Production and Inventory Behavior of the American Automobile Industry," Journal of Political Economy, University of Chicago Press, vol. 91(3), pages 365-400, June.
  5. Alan S. Blinder, 1986. "More on the Speed of Adjustment in Inventory Models," NBER Working Papers 1913, National Bureau of Economic Research, Inc.
  6. Eichenbaum, Martin, 1989. "Some Empirical Evidence on the Production Level and Production Cost Smoothing Models of Inventory Investment," American Economic Review, American Economic Association, vol. 79(4), pages 853-64, September.
  7. Kahn, James A, 1992. "Why Is Production More Volatile Than Sales? Theory and Evidence on the Stockout-Avoidance Motive for Inventory-Holding," The Quarterly Journal of Economics, MIT Press, vol. 107(2), pages 481-510, May.
  8. Garcia, R. & Perron, P., 1994. "An Analysis of the Real Interest rate Under Regime Shifts," Cahiers de recherche 9428, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
  9. Kahn, James A, 1987. "Inventories and the Volatility of Production," American Economic Review, American Economic Association, vol. 77(4), pages 667-79, September.
  10. Rossana, Robert J, 1998. "Structural Instability and the Production-Smoothing Model of Inventories," Journal of Business & Economic Statistics, American Statistical Association, vol. 16(2), pages 206-15, April.
  11. Ben S. Bernanke & Ilian Mihov, 1998. "Measuring Monetary Policy," The Quarterly Journal of Economics, MIT Press, vol. 113(3), pages 869-902, August.
  12. Christiano, Lawrence J & Eichenbaum, Martin & Evans, Charles, 1996. "The Effects of Monetary Policy Shocks: Evidence from the Flow of Funds," The Review of Economics and Statistics, MIT Press, vol. 78(1), pages 16-34, February.
  13. Aubhik Khan & Julia K. Thomas, 2004. "Inventories and the business cycle: an equilibrium analysis of (S,s) policies," Working Papers 04-11, Federal Reserve Bank of Philadelphia.
  14. Ramey, Valerie A, 1989. "Inventories as Factors of Production and Economic Fluctuations," American Economic Review, American Economic Association, vol. 79(3), pages 338-54, June.
  15. Alan S. Blinder, 1984. "Can The Production Smoothing Model of Inventory Behavior be Saved?," NBER Working Papers 1257, National Bureau of Economic Research, Inc.
  16. Yi Wen, 2011. "Input and output inventory dynamics," Working Papers 2011-008, Federal Reserve Bank of St. Louis.
  17. Schaller, Huntley, 2006. "Estimating the long-run user cost elasticity," Journal of Monetary Economics, Elsevier, vol. 53(4), pages 725-736, May.
  18. Wen, Yi, 2005. "Understanding the inventory cycle," Journal of Monetary Economics, Elsevier, vol. 52(8), pages 1533-1555, November.
  19. Hamilton, James D., 2002. "On the interpretation of cointegration in the linear-quadratic inventory model," Journal of Economic Dynamics and Control, Elsevier, vol. 26(12), pages 2037-2049, October.
  20. West, Kenneth D, 1990. "The Sources of Fluctuations in Aggregate Inventories and GNP," The Quarterly Journal of Economics, MIT Press, vol. 105(4), pages 939-71, November.
  21. Caballero, Ricardo J, 1994. "Small Sample Bias and Adjustment Costs," The Review of Economics and Statistics, MIT Press, vol. 76(1), pages 52-58, February.
  22. Maccini, Louis J & Rossana, Robert J, 1984. "Joint Production, Quasi-Fixed Factors of Production, and Investement in Finished Goods Inventories," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 16(2), pages 218-36, May.
  23. Michael C. Lovell, 1959. "Manufacturers' Inventories, Sales Expectations, and the Acceleration Principle," Cowles Foundation Discussion Papers 86, Cowles Foundation for Research in Economics, Yale University.
  24. Rossana, R J, 1993. "The Long-Run Implications of the Production Smoothing Model of Inventories: An Empirical Test," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 8(3), pages 295-306, July-Sept.
  25. Pengfei Wang & Yi Wen, 2009. "Inventory accelerator in general equilibrium," Working Papers 2009-010, Federal Reserve Bank of St. Louis.
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:frd:wpaper:dp2013-03. 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: (Fordham Economics)

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.