Retail inventories, internal finance, and aggregate fluctuations
Egon Zakrajsek ()
No 9722, Research Paper from Federal Reserve Bank of New York
We investigate the implications of capital market imperfections for inventory investment in retail trade, using a new source firm-level data--the micro data underlying the published Quarterly Financial Reports. An error-correction model that includes internal funds and forward-looking expectations for the stochastic process of sales is not rejected by the data. Both the cross-sectional and time-series results are consistent with the existence of significant capital market frictions in the retail trade sector: (1) for firms with limited access to capital markets, internal funds are a significant predictor of inventory investment; (2) the predictive power of internal funds is highly asymmetric over a business cycle, rising considerably in recessions. The quantitative significance of financial factors suggests that a large portion of the observed volatility in aggregate retail inventory investment over a business cycle is due to fluctuations in internal funds
Keywords: Retail trade; Inventories; Business cycles; Capital market (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6) Track citations by RSS feed
Downloads: (external link)
https://www.newyorkfed.org/medialibrary/media/rese ... rch_papers/9722.html (text/html)
https://www.newyorkfed.org/medialibrary/media/rese ... arch_papers/9722.pdf (application/pdf)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:fip:fednrp:9722
Ordering information: This working paper can be ordered from
Access Statistics for this paper
More papers in Research Paper from Federal Reserve Bank of New York Contact information at EDIRC.
Bibliographic data for series maintained by Amy Farber ().