Inventory

is there lineage investment when its expected rate of queerting even is strictly dominated by that of fixed-capital investment? Why is stock-take investment procyclical at business- musical rhythm frequencies but countercyclical at the very postgraduate frequencies (e.g., 2-3 quarters per cycle)? Why does the partitioning of production exceed the variance of gross revenue at the business-cycle frequencies but not so at the high frequencies? Why is instrument investment so vapourisable relative to GDP at the high frequencies but not so at the business cycle frequencies? Explaining these seemingly inexplicable features of parentage behavior is of great importance because for many eld economists have speculated that understanding inventory fluctuations may provide the give away to understanding the business cycle. This paper provides a general counterpoise analysis on inventory cycles and their relations to the business cycle. I show that in an environment where production and fixed-capital investment cannot line up instantaneously to respond to consumption demand shocks, firms opt to preserve inventories in the briefly run so as to turn away stockout and to debonaire production against demand uncertainty. These incentives for holding inventories in the short run have different effects on inventory cycles across different cyclical frequencies.



At the high frequencies inventory fluctuations are dominated by the production-smoothing motive and at the business-cycle frequencies inventory fluctuations are dominated by the stockout-avoidance motive. Consequently, inventory investment appears to be countercyclical and volatile at the high frequencies but procyclical and relatively smooth at the business-cycle frequencies, production appears to be less volatile than sales at the high frequencies but more volatile than sales at the business-cycle frequencies. I also show that the inventory cycle and the business cycle are intimately related by sharing a common source of uncertainty--consumption demand, which leads to the phenomena that...If you want to get a full essay, order it on our website: Ordercustompaper.com



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