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What Drives Inventory Accumulation? News on Rates of Return and Marginal Costs

Christoph Görtz (), Christopher Gunn () and Thomas Lubik ()

No 19-18, Working Paper from Federal Reserve Bank of Richmond

Abstract: We study the effects of news shocks on inventory accumulation in a structural VAR framework. We establish that inventories react strongly and positively to news about future increases in total factor productivity. Theory suggests that the transmission channel of news shocks to inventories works through movements in marginal costs, through movements in sales, or through interest rates. We provide evidence that changes in external and internal rates of return are central to the transmission for such news shocks. We do not find evidence of a strong substitution effect that shifts production from the present into the future.

Keywords: Structural VAR; News Shocks; Inventories (search for similar items in EconPapers)
JEL-codes: C32 E22 E32 G31 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2019-10-10
New Economics Papers: this item is included in nep-mac
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