Skip to main content
Kent Academic Repository

Inventory Cycles

Shibayama, Katsuyuki (2008) Inventory Cycles. Working paper. Department of Economics, University of Kent at Canterbury, Canterbury, Kent (KAR id:6293)

Abstract

This paper investigates a rational dynamic stochastic general equilibrium model with a stockout constraint and a production chain. Our model shows that both stockout avoidance and cost shock mechanisms replicate stylised inventory facts -- production is more volatile than sales and inventory investment is procyclical. In addition, production smoothing also works at very high frequencies. Note that the cost shock and production smoothing mechanisms are naturally embedded in our micro-founded general equilibrium framework. Moreover, as a by-product, the production chain causes the slow adjustment of inventories in aggregate. Consequently, our model generates (a) high labour volatility and (b) low correlation between labour productivity and output; the standard RBC cannot produce these two empirical findings. Finally, our model yields inventory cycles.

Item Type: Reports and Papers (Working paper)
Uncontrolled keywords: Inventories, Inventory cycles, Stockout constraint, Production Chain, Over?damped oscillations, Dynamic stochastic general equilibrium model
Subjects: H Social Sciences > HB Economic Theory
Divisions: Divisions > Division of Human and Social Sciences > School of Economics
Depositing User: Katsuyuki Shibayama
Date Deposited: 14 Apr 2009 14:33 UTC
Last Modified: 16 Nov 2021 09:44 UTC
Resource URI: https://kar.kent.ac.uk/id/eprint/6293 (The current URI for this page, for reference purposes)

University of Kent Author Information

Shibayama, Katsuyuki.

Creator's ORCID:
CReDIT Contributor Roles:
  • Depositors only (login required):

Total unique views for this document in KAR since July 2020. For more details click on the image.