The Production Smoothing Model of Inventories Revisited

Alistair Milne ()

Economic Journal, 1994, vol. 104, issue 423, 399-407

Abstract: An error correction specification which nests the linear-quadratic production smoothing and stock-adjustment models of inventories is estimated on U.S. seasonally adjusted two-digit SIC data. The restrictions of the general model to the production smoothing specification is accepted for four out of six of the production-to-stock industries and for total nondurables. The estimation results do not suggest any use of inventories to smooth the level of production, but there is evidence of smoothing of the rate of change of production for three production-to-stock industries and for both total nondurables and total durables. Coefficient estimates may, however, be biased. Copyright 1994 by Royal Economic Society.

Date: 1994
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