Inventory Investment Dynamics and Recoveries: A Comparison of Manufacturing and Retail Trade Sectors

Frédérique Bec and Marie Bessec

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Abstract: This paper explores the existence of a bounce-back effect in inventory investment using the European Commission opinion survey on stocks of finished products in manufacturing and retail trade sectors for France, Germany and a European aggregate, from 1985q1 to 2011q4. Our empirical findings support the existence of a high recovery episode for inventory investment, during the quarters immediately following the recessions: it occurs later and lasts longer in manufacturing than in retail trade sector. Since a third phase of rapid recovery has not been found in final sales data so far, the rebound in inventories could in turn explain the GDP growth bounce-back pointed out in previous empirical studies. This calls for a careful modeling of the inventory investment behavior in any sensible theoretical explanation of aggregate business cycles.

Keywords: Threshold auto-regression; bounce-back effects; business cycles; inventory investment (search for similar items in EconPapers)
Date: 2013
Note: View the original document on HAL open archive server: https://hal.science/hal-01515613v1
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Published in Economics Bulletin, 2013, 33 (3)

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Related works:
Journal Article: Inventory Investment Dynamics and Recoveries: A Comparison of Manufacturing and Retail Trade Sectors (2013)
Working Paper: Inventory Investment Dynamics and Recoveries: A Comparison of Manufacturing and Retail Trade Sectors (2013)
Working Paper: Inventory Investment Dynamics and Recoveries: A Comparison of Manufacturing and Retail Trade Sectors (2012)
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