Has Inventory Investment Been Liquidity-Constrained? Evidence From U.S. Panel Data

Yungsan Kim and Woon Gyu Choi

No 2001/122, IMF Working Papers from International Monetary Fund

Abstract: Based on an analysis of high-frequency panel data for U.S. firms, this paper finds that inventory investment has been liquidity-constrained in most periods during 1975-97, but less so, or not at all, during recessions. This result can be justified on the grounds that inventory fluctuations are largely attributable to unexpected sales shocks, and that firms increase liquid assets before recessions. Moreover, this results holds irrespective of whether the firm has a bond rating, contrary to the finding of Kashyap, Lamont, and Stein (1994) that inventory investment is liquidity-constrained during recessions only for firms without bond ratings.

Keywords: WP; inventory investment; mover accent; liquidity constraint; monetary policy; panel data; S&P firm; sales growth; firm selection criterion; senior debt; representative firm; liquidity position; Liquidity; Liquidity management; Bond ratings; Currencies; Monetary tightening (search for similar items in EconPapers)
Pages: 41
Date: 2001-08-01
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Citations: View citations in EconPapers (4)

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