Inventory Investment and the Real Interest Rate

Sadaquat Junayed and Hashmat Khan ()

No 2009-23, Economics Discussion Papers from Kiel Institute for the World Economy (IfW Kiel)

Abstract: The relationship between inventory investment and the real interest rate has been difficult to assess empirically. Recent work has proposed a linear-quadratic inventory model with time-varying discount factor to identify the effects of real interest rate on inventory investment. The authors show that this framework does not separately identify the effects of real interest rate on inventory investment from variables that determine the expected marginal cost of production. Consequently, understanding the relationship between inventory investment and the real interest rate continues to be a challenge for macroeconomists.

Keywords: Inventory investment; real interest rate (search for similar items in EconPapers)
Date: 2009
New Economics Papers: this item is included in nep-mac
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:ifwedp:7587

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