The Determinants of Manufacturing Inventories in the UK

Keith Cuthbertson and David Gasparro

Economic Journal, 1993, vol. 103, issue 421, 1479-92

Abstract: The authors examine the determinants of inventory holding by the U.K. manufacturing sector over the period 1968-89. They find that inventory levels respond positively to output and its conditional variance and negatively to the level of gearing. Tehnological innovation in the form of computerized inventory control leads to a fall in the stock-output ratio. Epirical results for inventories are examined in a cointegration and a general-to-specific error correction model with conditional variances estimated using an ARCH framework. A backward-looking error correction model is found to outperform a forward-looking model, although the latter also provides a reasonable 'fit'to the data. Copyright 1993 by Royal Economic Society.

Date: 1993
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