Can The Production Smoothing Model of Inventory Behavior be Saved?
The production smoothing model of inventory behavior has a long and venerable history, and theoretical foundations which seem very strong. Yet certain overwhelming facts seem not only to defy explanation within the production smoothing framework, but actually to argue that the basic idea of production smoothing is all wrong. Most prominent wnong these is the fact that the variance of detrended production exceeds the variance of detrended sales.This paper first documents the stylized facts. Then it derives the production smoothing model rigorously and explains how the model can be amended to make it consistent with the facts. Next, estimates of stock adjustment equations derived from the theory are presented and evaluated. Finally, it reviews the theoretical and empirical evidence and tries to drawsome tentative conclusions.
|Date of creation:||Jan 1984|
|Date of revision:|
|Publication status:||published as Blinder, Alan S. "Can the Production Smoothing Model of Inventory Behavior Be Saved?" Quarterly Journal of Economics, August 1986, pp431-453.|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
Web page: http://www.nber.org
More information through EDIRC
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.:
- Martin Feldstein & Alan Auerbach, 1976. "Inventory Behavior in Durable-Goods Manufacturing: The Target-Adjustment Model," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 7(2), pages 351-408.
- 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.
- Olivier J. Blanchard, 1982. "The Production and Inventory Behavior of the American Automobile Industry," NBER Working Papers 0891, National Bureau of Economic Research, Inc.
- Kenneth D. West, 1985.
"A Variance Bounds Test of the Linear Quardractic Inventory Model,"
NBER Working Papers
1581, National Bureau of Economic Research, Inc.
- West, Kenneth D, 1986. "A Variance Bounds Test of the Linear Quadratic Inventory Model," Journal of Political Economy, University of Chicago Press, vol. 94(2), pages 374-401, April.
- Akhtar, M A, 1983. "Effects of Interest Rates and Inflation on Aggregate Inventory Investment in the United States," American Economic Review, American Economic Association, vol. 73(3), pages 319-28, June.
- Alan J. Auerbach & Jerry R. Green, 1980. "Components of Manufacturing Inventories," NBER Working Papers 0491, National Bureau of Economic Research, Inc.
- F. Owen Irvine, 1981. "Specification errors and the stock-adjustment model: why estimated speeds-of-adjustment are too slow in inventory equations," Working Paper Series / Economic Activity Section 14, Board of Governors of the Federal Reserve System (U.S.).
- Lieberman, Charles, 1980. "Inventory Demand and Cost of Capital Effects," The Review of Economics and Statistics, MIT Press, vol. 62(3), pages 348-56, August.
- 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.
- Alan S. Blinder, 1981. "Retail Inventory Behavior and Business Fluctuations," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 12(2), pages 443-520.
- Irvine, F Owen, Jr, 1981. "Retail Inventory Investment and the Cost of Capital," American Economic Review, American Economic Association, vol. 71(4), pages 633-48, September.
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:1257. 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: ()
If references are entirely missing, you can add them using this form.