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Inventories, Fluctuations and Business Cycles. Working paper #4

Author

Listed:
  • Louis J. Maccini
  • Adrian Pagan

    (National Centre for Econometric Research)

Abstract

The paper looks at the role of inventories in U.S. business cycles and fluctuations. It concentrates upon the goods producing sector and constructs a model that features both input and output inventories. A range of shocks are present in the model, including sales, technology and inventory cost shocks. It is found that the presence of inventories does not change the average business cycle characteristics in the U.S. very much. The model is also used to examine whether new techniques for inventory control might have been an important contributing factor to the decline in the volatility of US GDP growth. It is found that these would have had little impact upon the level of volatility.

Suggested Citation

  • Louis J. Maccini & Adrian Pagan, 2006. "Inventories, Fluctuations and Business Cycles. Working paper #4," NCER Working Paper Series 4, National Centre for Econometric Research.
  • Handle: RePEc:qut:auncer:2006-4
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    File URL: http://www.ncer.edu.au/papers/documents/WPNo4.pdf
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    References listed on IDEAS

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    1. Pagan, Adrian, 1999. "Some uses of simulation in econometrics," Mathematics and Computers in Simulation (MATCOM), Elsevier, vol. 48(4), pages 341-349.
    2. Ramey, Valerie A. & West, Kenneth D., 1999. "Inventories," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 13, pages 863-923, Elsevier.
    3. Stephen G Cecchetti & Alfonso Flores-Lagunes & Stefan Krause, 2005. "Assessing the Sources of Changes in the Volatility of Real Growth," RBA Annual Conference Volume (Discontinued), in: Christopher Kent & David Norman (ed.),The Changing Nature of the Business Cycle, Reserve Bank of Australia.
    4. 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.
    5. James A. Kahn & Mark Bils, 2000. "What Inventory Behavior Tells Us about Business Cycles," American Economic Review, American Economic Association, vol. 90(3), pages 458-481, June.
    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. 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.
    8. JONATHAN McCARTHY & EGON ZAKRAJSEK, 2007. "Inventory Dynamics and Business Cycles: What Has Changed?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(2-3), pages 591-613, March.
    9. 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.
    10. 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, vol. 8(May), pages 183-202.
    11. Arthur F. Burns & Wesley C. Mitchell, 1946. "Measuring Business Cycles," NBER Books, National Bureau of Economic Research, Inc, number burn46-1, November.
    12. Duffy, William J & Lewis, Kenneth A, 1975. "The Cyclic Properties of the Production-Inventory Process," Econometrica, Econometric Society, vol. 43(3), pages 499-512, May.
    13. Shaghil Ahmed & Andrew Levin & Beth Anne Wilson, 2004. "Recent U.S. Macroeconomic Stability: Good Policies, Good Practices, or Good Luck?," The Review of Economics and Statistics, MIT Press, vol. 86(3), pages 824-832, August.
    14. Engel, J. & Haugh, D. & Pagan, A., 2005. "Some methods for assessing the need for non-linear models in business cycle analysis," International Journal of Forecasting, Elsevier, vol. 21(4), pages 651-662.
    15. Binder,M. & Pesaran,H.M., 1995. "Multivariate Rational Expectations Models and Macroeconomic Modelling: A Review and Some New Results," Cambridge Working Papers in Economics 9415, Faculty of Economics, University of Cambridge.
    16. 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.
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    Cited by:

    1. Tatiana Cesaroni, 2011. "The cyclical behavior of the Italian business survey data," Empirical Economics, Springer, vol. 41(3), pages 747-768, December.
    2. Thomas A. Lubik & Wing Leong Teo, 2009. "Inventories and optimal monetary policy," Economic Quarterly, Federal Reserve Bank of Richmond, vol. 95(Fall), pages 357-382.

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