Tsoukalas, John (2009): Input and Output Inventories in the UK. Forthcoming in: Economica
Download (251Kb) | Preview
What is the role of inventories in UK manufacturing? We present and estimate a model of inventories that considers separately finished goods and input (i.e. the sum of raw materials and work-in-process) inventories. We estimate structural parameters which allows us to make inferences on the role of inventories in cyclical frequencies. Our results suggest that both types of inventories are used for production level (from demand shocks) and production cost (from cost shocks) smoothing. We identify a small but significant negative relationship between inventories and the real interest rate thus providing support for one of the textbook channels of the monetary policy transmission mechanism. Variance decompositions indicate that technology shocks are the dominant driving factor behind cyclical changes in inventories. These shocks account for over 35% of the forecast error variance at these frequencies.
|Item Type:||MPRA Paper|
|Original Title:||Input and Output Inventories in the UK|
|Keywords:||Inventories; Linear-quadratic model; Interest rates|
|Subjects:||E - Macroeconomics and Monetary Economics > E2 - Macroeconomics: Consumption, Saving, Production, Employment, and Investment > E22 - Capital; Investment; Capacity
E - Macroeconomics and Monetary Economics > E2 - Macroeconomics: Consumption, Saving, Production, Employment, and Investment > E23 - Production
C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods and Methodology: General > C11 - Bayesian Analysis: General
|Depositing User:||John Tsoukalas|
|Date Deposited:||18. Nov 2009 00:51|
|Last Modified:||13. Feb 2013 10:15|
Banerjee, A. and Mizen, P.: 2006, A re-interpretation of the linear-quadratic model when inventories and sales are polynomially cointegrated, Journal of Applied Econometrics 21.
Benito, A.: 2005, Financial pressure, monetary policy effects and inventories: Firm-level evidence from a market based and a bank-based ¯nancial system, Economica 72.