Inventories and the Business Cycle: Testing a Sequential Trading Model

Benjamin Eden ()

Review of Economic Dynamics, 2001, vol. 4, issue 3, 562-574

Abstract: The uncertain and sequential trading (UST) model of inventories behavior with iid shocks predicts that (a) the beginning of period inventories is a sufficient statistic for past variables and (b) an increase in the beginning of period inventories reduces output, employment, hours per employee, and effort. I find empirical support for the second hypothesis but not for the first. The rejection of the first hypothesis is rather informative and points in the direction of adjustment costs and/or serially correlated shocks. (Copyright: Elsevier)

Keywords: inventories; business cycle (search for similar items in EconPapers)
JEL-codes: E22 E32 (search for similar items in EconPapers)
Date: 2001
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DOI: 10.1006/redy.2000.0125

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