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Inventory Investment Dynamics and Recoveries: A Comparison of Manufacturing and Retail Trade Sectors

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  • Frédérique Bec

    (CREST-INSEE - Centre de Recherche en Economie et Statistique)

  • Marie Bessec

    (LEDa - Laboratoire d'Economie de Dauphine - IRD - Institut de Recherche pour le Développement - Université Paris Dauphine-PSL - PSL - Université Paris sciences et lettres - CNRS - Centre National de la Recherche Scientifique)

Abstract

This paper explores the existence of a bounce-back effect in inventory investment using the European Commission opinion survey on stocks of finished products in manufacturing and retail trade sectors for France, Germany and a European aggregate, from 1985q1 to 2011q4. Our empirical findings support the existence of a high recovery episode for inventory investment, during the quarters immediately following the recessions: it occurs later and lasts longer in manufacturing than in retail trade sector. Since a third phase of rapid recovery has not been found in final sales data so far, the rebound in inventories could in turn explain the GDP growth bounce-back pointed out in previous empirical studies. This calls for a careful modeling of the inventory investment behavior in any sensible theoretical explanation of aggregate business cycles.

Suggested Citation

  • Frédérique Bec & Marie Bessec, 2013. "Inventory Investment Dynamics and Recoveries: A Comparison of Manufacturing and Retail Trade Sectors," Post-Print hal-01515613, HAL.
    • Handle: RePEc:hal:journl:hal-01515613
    Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-01515613
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    References listed on IDEAS

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    1. Camacho, Maximo & Perez Quiros, Gabriel & Rodriguez Mendizabal, Hugo, 2011. "High-growth recoveries, inventories and the Great Moderation," Journal of Economic Dynamics and Control, Elsevier, vol. 35(8), pages 1322-1339, August.
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    4. Frédérique BEC & Othman BOUABDALLAH & Laurent FERRARA, 2011. "The Possible Shapes of Recoveries in Markov-Switching Models," Working Papers 2011-02, Center for Research in Economics and Statistics.
    5. Jeremy Piger & James Morley & Chang-Jin Kim, 2005. "Nonlinearity and the permanent effects of recessions," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 20(2), pages 291-309.
    6. 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.
    7. Moses Abramovitz, 1950. "Total Inventories during Business Cycles," NBER Chapters, in: Inventories and Business Cycles, with Special Reference to Manufacturers' Inventories, pages 76-108, National Bureau of Economic Research, Inc.
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    11. Bec Frédérique & Salem Melika Ben, 2013. "Inventory investment and the business cycle: the usual suspect," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 17(3), pages 335-343, May.
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    Cited by:

    1. Barthélemy, J. & Marx, M., 2012. "Generalizing the Taylor Principle: New Comment," Working papers 403, Banque de France.

    More about this item

    Keywords

    Threshold auto-regression; bounce-back effects; business cycles; inventory investment;

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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