Peeters, H.M.M. (1997): The (mis-)specification of production costs in production smoothing models. Published in: Economics Letters No. 57 : pp. 69-77.
Download (111kB) | Preview
Estimation results obtained with production smoothing models are often imprecise and sensitive to normalisation rules. It is argued that production costs in these models can be better specified in terms of production factor costs. The resulting (factor demand) model with inventories leads to more efficient estimation results and normalisation rules become even redundant. Furthermore, the (smoothing) role of inventories with respect to production factors is discussed.
|Item Type:||MPRA Paper|
|Original Title:||The (mis-)specification of production costs in production smoothing models|
|Keywords:||inventories; production smoothing model; factor demand; investment; labour; production factors; econometric modeling|
|Subjects:||G - Financial Economics > G3 - Corporate Finance and Governance > G31 - Capital Budgeting ; Fixed Investment and Inventory Studies ; Capacity
E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy
E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E24 - Employment ; Unemployment ; Wages ; Intergenerational Income Distribution ; Aggregate Human Capital ; Aggregate Labor Productivity
|Depositing User:||Marga (H.M.M.) Peeters|
|Date Deposited:||17. Feb 2011 10:50|
|Last Modified:||13. Feb 2013 12:36|
Blinder, 1982, Inventories and sticky prices: More on the microfoundations of macroeconomics, American Economic Review, 72, 334-348
Durlauv and Maccini, 1993, Measuring noise in inventory models. NBER, Working paper no 4487, Cambridge, Massachusetts
Eichenbaum, 1989, Some empirical evidence on teh production smoothing level and production cost smoothing models of inventory investment, American Economic Review, 79, 853-864
Holt, Modigliani, Muth and Simon, 1960, Planning production, inventories and work force, Prentice Hall Inc Englewooc Cliffs N.J.
Peeters, 1997, A comparison of a production smoothing model and a dynamic factor demand model with inventories: Applications to French industrial sectors. Annales d'Economie et de Statistique 46, 141-160
Pindyck and Rotemberg, 1983, Dynamic factor demands and the effects of energy price shocks, American Economic Review, 73, 1066-1079
Ramey, 1991, Nonconvex costs and the behaviour of inventories, Journal of Political Economy, 99, 306-334
Rossana, 1993, The long-run implications of the production smoothing model of inventories: An empirical test, Journal of Applied Econometrics 8, 295-306
West, 1986, A variance bounds test of the linear quadratic inventory model, Journal of Political Economy, 94, 374-401
West, 1993, Inventory models, NBER, Technical Working Paper No 143, Cambridge, Massachusetts
West and Wilcox, 1993, Some evidence on finite sample behaviour of an instrumental variables estimator of the linear quadratic inventory model, NBER, Technical Paper no 139, Cambridge, Massachusetts