Uncertainty in Sales and Inventory Behaviour in the U.S. Trade Sectors

Tae Hwy Lee and Faik Koray ()

Canadian Journal of Economics, 1994, vol. 27, issue 1, 129-42

Abstract: This paper investigates uncertainty in sales and inventory behavior for the U.S. wholesale and retail trade sectors. First, using a vector error correction model with GARCH-M, the authors find that the uncertainty measured by forecast error variance in sales does not affect inventory behavior in both trade sectors. Second, using forecast error variance decomposition and estimated permanent components, they observe that the uncertainty may be attributed more to demand shocks than to cost shocks.

Date: 1994
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