On the Periodicity of Inventories

Shibayama, Katsuyuki (2008) On the Periodicity of Inventories. Working paper. Department of Economics, University of Kent at Canterbury, Canterbury, Kent (Full text available)

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Abstract

This article studies inventories and monetary policy by estimating VAR models. The complex roots detected in our estimation generate cycles of around 55 to 70 months, which are quite close to actual business cycle lengths. This implies that production and inventories follow damped oscillations (stable sine curves), implying that a boom is the seed of the following recession, and vice versa. Interestingly, the peaks and troughs of policy interest rate precedes those of production in the U.S. (i.e., forward-looking monetary policy), but not in Japan. The central banks in both countries react sharply to demand shocks, but not to supply shocks, because booms after positive demand shocks last longer as firms replenish reduced inventories, while booms after positive supply shocks are short-lived as the initial accumulation of inventories suppresses production in subsequent periods.

Item Type: Monograph (Working paper)
Uncontrolled keywords: Inventories, Inventory cycle, Business cycle, Monetary policy, Damped oscillations, Phase shift, Spectrum
Subjects: H Social Sciences > HB Economic Theory
Divisions: Faculties > Social Sciences > School of Economics
Depositing User: Katsuyuki Shibayama
Date Deposited: 14 Apr 2009 14:39
Last Modified: 05 Sep 2011 23:50
Resource URI: http://kar.kent.ac.uk/id/eprint/6295 (The current URI for this page, for reference purposes)
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