Production and Inventory Behavior of Capital

Yi Wen

Annals of Economics and Finance, 2007, vol. 8, issue 1, 95-112

Abstract: This paper provides a dynamic optimization model of durable goods inventories to study the interactions between investment demand and the production of capital goods. There are three major findings: first, capital suppliers¡¯ inventory behavior makes investment demand more volatile in equilibrium; second, equilibrium price of capital is characterized by downward stickiness; and third, the responses of the capital market to interest rate and other environmental changes are asymmetric. All are the result of equilibrium interactions between demand and supply.

Keywords: Investment; Capital theory; Capital supply; Inventory; Durable goods (search for similar items in EconPapers)
JEL-codes: E22 E23 E32 (search for similar items in EconPapers)
Date: 2007
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Related works:
Working Paper: Production and inventory behavior of capital (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:cuf:journl:y:2007:v:8:i:1:p:95-112

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