Inventories and the stockout constraint in general equilibrium
Shibayama Katsuyuki () and
Jagjit Chadha ()
Additional contact information
Shibayama Katsuyuki: School of Economics, University of Kent, Canterbury, UK
The B.E. Journal of Macroeconomics, 2014, vol. 14, issue 1, pages 48
We study the implications of a stockout constraint in a dynamic general equilibrium model, which can explain both standard business cycle and inventory facts. Under this constraint, inventories and demand are complements in generating sales, and hence the optimal level of inventories increases in expected demand. We show that the inventory to sales ratio is both persistent and countercyclical because the cost of carrying inventories is mainly determined by the interest rate. We use this model to disentangle output and sales, by matching the key inventory moments, and find that preference and productivity shocks are equally important in the data. Finally, we assess whether improvements in inventory management can explain the Great Moderation. We find that, although improvements in inventory management can reduce the need for inventory holdings, which decreases output volatility relative to sales volatility, lower levels of inventories actually increases sales volatility. Because these two effects offset each other, a change in inventory management does not change output volatility to any great extent.
References: View references in EconPapers View complete reference list from CitEc
Citations Track citations by RSS feed
Downloads: (external link)
https://www.degruyter.com/view/j/bejm.2014.14.issu ... -0138.xml?format=INT (text/html)
For access to full text, subscription to the journal or payment for the individual article is required.
Working Paper: Inventories and the Stockout Contstraint in General Equilibrium (2013)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: http://EconPapers.repec.org/RePEc:bpj:bejmac:v:14:y:2014:i:1:p:48:n:9
Ordering information: This journal article can be ordered from
Access Statistics for this article
The B.E. Journal of Macroeconomics is currently edited by Arpad Abraham and Tiago Cavalcanti
More articles in The B.E. Journal of Macroeconomics from De Gruyter
Series data maintained by Peter Golla ().