Market Perceptions and Inventory-Price-Employment Plans

John Carlson and William C Dunkelberg

The Review of Economics and Statistics, 1989, vol. 71, issue 2, 318-24

Abstract: Ordered-probit analyses of National Federation of Independent Business survey data show that individual firms generally conform to the stock adjustment model of inventory investment, with the predicted response more likely when inventories are perceived as excessive than when deficient. Contrary to inferences about slow adjustment speeds from aggregate data, inventory adjustments by individual firms do not tend to take more than three months to complete. There is no evidence that price is used to achieve desired inventory targets, but prices are sticky in that changes set in motion one quarter tend to continue into the next quarter. Copyright 1989 by MIT Press.

Date: 1989
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