Identifying the German Inventory Cycle: A Multivariate Structural Time Series Approach Using Survey Data

Langmantel Erich ()
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Langmantel Erich: IFO Institute for Economic Research, Poschingerstr. 5, D-81679 Muenchen, Germany

Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), 2005, vol. 225, issue 6, 675-687

Abstract: Inventory fluctuations play an important role in the formation of business cycles. In Germany, little research has been dedicated to this topic recently. In this study, a structural time series model in the tradition of Harvey (1989) is employed to decompose German inventory investment into trend, cyclical and seasonal components. The empirical findings are compared with the results of theoretical inventory models. The estimations suggest that the German inventory cycle consists of three sub-cycles with periods of one, three and eight years. The three-year cycle of inventory investment corresponds to the well known “Kitchin” cycle and has a significant impact on GDP fluctuations. Adding the inventory assessment variable from the IFO business survey to the model improves the results. It turns out that the inventory assessment variable has properties of a leading indicator. These findings may be useful to improve macroeconomic forecasting

Keywords: Inventory cycle; unobserved components models; survey data (search for similar items in EconPapers)
Date: 2005
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:jns:jbstat:v:225:y:2005:i:6:p:675-687

DOI: 10.1515/jbnst-2005-0607

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