Production and inventory behavior of capital

Yi Wen

No 2005-044, Working Papers from Federal Reserve Bank of St. Louis

Abstract: This paper provides a dynamic optimization model of durable good inventories to study the interactions between investment demand and production of capital goods. There are three major findings: First, capital suppliers' inventory behavior makes investment demand more volatile in equilibrium; Second, equilibrium price of capital is characterized by downward stickiness; Third, the responses of the capital market to interest rate and other environmental changes are asymmetric. All are the results of equilibrium interactions between demand and supply.

Keywords: Production (Economic theory); Business cycles; Investments (search for similar items in EconPapers)
Date: 2005
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Related works:
Journal Article: Production and Inventory Behavior of Capital (2007)
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DOI: 10.20955/wp.2005.044

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