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Just-in-case inventories - a cross-country analysis

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  • Guasch, J. Luis
  • Kogan, Joseph

Abstract

The authors find that raw materials inventories in the manufacturing sector in the 1970s and 1980s were two to three times higher in developing countries than in the United States, despite the fact that in most developing countries real interest rates were at least twice as high. Those significantly high levels of inventories are a burden and an obstacle to country competitiveness and need to be addressed. Poor infrastructure and ineffective regulation, as well as deficiencies in market development, rather than the traditional factors used in inventory models (such as interest rates and uncertainty), are the main determinants and explain these differences. Cross-country estimations show that a one standard deviation worsening of infrastructure increases raw materials inventories by 11 percent to 37 percent, and a one standard deviation worsening of markets increases raw materials inventories by 18 percent to 37 percent. These findings are robust across a number of different proxies and specifications, including an industry-level specification that controls for fixed country effects.

Suggested Citation

  • Guasch, J. Luis & Kogan, Joseph, 2003. "Just-in-case inventories - a cross-country analysis," Policy Research Working Paper Series 3012, The World Bank.
  • Handle: RePEc:wbk:wbrwps:3012
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    References listed on IDEAS

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    Cited by:

    1. Ioannis N. Kessides, 2012. "Regionalising Infrastructure for Deepening Market Integration: The Case of East Africa," Journal of Infrastructure Development, India Development Foundation, vol. 4(2), pages 115-138, December.
    2. Estache, Antonio & de la Fe, Beatriz Tovar & Trujillo, Lourdes, 2004. "Sources of efficiency gains in port reform: a DEA decomposition of a Malmquist TFP index for Mexico," Utilities Policy, Elsevier, vol. 12(4), pages 221-230, December.
    3. Charles Kunaka & Robin Carruthers, 2014. "Trade and Transport Corridor Management Toolkit," World Bank Publications - Books, The World Bank Group, number 18241, December.
    4. Guerrero, Pablo & Lucenti, Krista & Galarza S., Sebastián, 2009. "Trade Logistic and Regional Integration in Latin America & the Caribbean," IDB Publications (Working Papers) 2549, Inter-American Development Bank.
    5. Pablo Guerrero & Krista Lucenti & Sebastián Galarza, 2010. "Trade Logistics and Regional Integration in Latin America and the Caribbean," Trade Working Papers 22752, East Asian Bureau of Economic Research.
    6. Pablo Guerrero & Krista Lucenti & Sebastián Galarza S., 2009. "Trade Logistic and Regional Integration in Latin America & the Caribbean," IDB Publications (Working Papers) 9331, Inter-American Development Bank.

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