 Inventory growth cycles with debt-financed investmentMatheus R. Grasselli and
Adrien Nguyen-Huu
Post-Print from HAL Abstract: We propose a continuous-time stock-flow consistent model for inventory dynamics in an economy withfirms, banks, and households. On the supply side, firms decide on production based on adaptive expectations for sales demand and a desired level of inventories. On the demand side, investment is determined as a function of utilization and profitability and can be financed by debt, whereas consumption is independently determined as a function of income and wealth. Prices adjust sluggishly to both changes in labour costs and inventory. Disequilibrium between expected sales and demand is absorbed by unplanned changes in inventory. This results in a five-dimensional dynamical system for wage share, employment rate, private debt ratio, expected sales, and capacity utilization. We analyze two limiting cases: the long-run dynamics provides a version of the Keen model with effective demand and varying inventories, whereas the short-run dynamics gives rise to behaviour that we interpret as Kitchin cycles. Keywords: business cycles; disequilibrium analysis; inventories; macroeconomic dynamics (search for similar items in EconPapers) Published in Structural Change and Economic Dynamics, 2018, 44 (1), pp.1--13. ⟨10.1016/j.strueco.2018.01.003⟩ There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it. Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01950059 DOI: 10.1016/j.strueco.2018.01.003 Access Statistics for this paper More papers in Post-Print from HAL |
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