Input and Output Inventories in General Equilibrium
Matteo Iacoviello (),
Fabio Schiantarelli () and
Scott Schuh ()
No 658, Boston College Working Papers in Economics from Boston College Department of Economics
We build and estimate a two-sector (goods and services) dynamic general equilibrium model with two types of inventories: finished goods (output) inventories yield utility services while materials (input) inventories facilitate the production of goods. The model, which contains neutral and inventory-specific technology shocks and preference shocks, is estimated by Bayesian methods. The estimated model replicates the volatility and cyclicality of inventory investment and inventory-target ratios. When estimated over subperiods, the results suggest that changes in the volatility of inventory shocks, or in structural parameters associated with inventories, play a minor role in the reduction of the volatility of output.
Keywords: Inventories; business cycles; output volatility; Bayesian estimation (search for similar items in EconPapers)
JEL-codes: E22 E32 E37 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec, nep-dge and nep-mac
Date: 2007-03-23, Revised 2009-10-23
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Journal Article: INPUT AND OUTPUT INVENTORIES IN GENERAL EQUILIBRIUM (2011)
Working Paper: Input and output inventories in general equilibrium (2010)
Working Paper: Input and output inventories in general equilibrium (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:boc:bocoec:658
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