(S, S) Inventory Policies in General Equilibrium PDF Download
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Author: Jonas Daniel Maurice Fisher
Publisher:
ISBN:
Category : Equilibrium (Economics)
Languages : en
Pages : 60
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Book Description
Author: Jonas Daniel Maurice Fisher
Publisher:
ISBN:
Category : Equilibrium (Economics)
Languages : en
Pages : 60
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Book Description
Author: Jonas D.M. FISHER
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Author: Pengfei Wang
Publisher:
ISBN:
Category :
Languages : en
Pages : 54
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We estimate a DSGE model with (S,s) inventory policies. We find that (i) taking inventories into account can significantly improve the empirical fit of DSGE models in matching the standard business-cycle moments (in addition to explaining inventory fluctuations); (ii) (S,s) inventory policies can significantly amplify aggregate output fluctuations, in contrast to the findings of the recent general-equilibrium inventory literature; and (iii) aggregate demand shocks become more important than technology shocks in explaining the business cycle once inventories are incorporated into the model. An independent contribution of our paper is that we develop a solution method for analytically solving (S,s) inventory policies in general-equilibrium models with heterogeneous ጿirms and a large aggregate state space, and we illustrate how standard log-linearization methods can be used to solve various versions of our inventory model, generate impulse response functions, and estimate the model's deep structural parameters.
Author: Aubhik Khan
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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We develop an equilibrium business cycle model in which the producers of final goods pursue generalized (S,s) inventory policies with respect to intermediate goods, a consequence of nonconvex factor adjustment costs. Calibrating our model to reproduce the average inventory-to-sales ratio in postwar U.S. data, we find that it explains over half of the cyclical variability of inventory investment. Moreover, inventory accumulation is strongly procyclical, and production is more volatile than sales, as in the data. The comovement between inventory investment and final sales is often interpreted as evidence that inventories amplify aggregate fluctuations. In contrast, our model economy exhibits a business cycle similar to that of a comparable benchmark without inventories, though we do observe somewhat higher variability in employment, and lower variability in consumption and investment. Thus, equilibrium analysis, which necessarily endogenizes final sales, alters our understanding of the role of inventory accumulation for cyclical movements in GDP. The presence of inventories does not substantially raise the variability of production, because it dampens movements in final sales. Similarly, when reductions in adjustment costs lower, but do not eliminate, average inventory holdings, the variability of GDP is essentially unchanged, because the reduced costs cause an o.setting rise in the variability of final sales.
Author: Ichiro Fukunaga
Publisher:
ISBN:
Category : Inventories
Languages : en
Pages : 44
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This paper studies the role of inventories in the propagation of monetary shocks by developing simple dynamic general equilibrium models that assume predetermined prices. Inventories serve as a source of real rigidities, that is, amplify the real effects of monetary policy. I introduce a sales-facilitating motive as well as a production-smoothing motive for holding inventories. Inventories respond procyclically and prices are adjusted gradually to a nominal disturbance only if the sales-facilitating motive is relatively strong; otherwise inventories respond countercyclically and prices are adjusted excessively. I also consider the models that assume that both production and prices are predetermined, in which inventories absorb shocks in an unintended manner. In a case where the decision lag of price setting is longer than that of production, inventories respond countercyclically at first and then move procyclically, which is consistent with the pattern shown in empirical studies.
Author: Matteo Iacoviello
Publisher:
ISBN:
Category : Equilibrium (Economics)
Languages : en
Pages : 50
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Author: Alan S. Blinder
Publisher: Elsevier
ISBN: 1483264831
Category : Business & Economics
Languages : en
Pages : 272
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Book Description
Natural Resources, Uncertainty, and General Equilibrium Systems: Essays in Memory of Rafael Lusky compiles a collection of works by economists who had been friends and colleagues of Rafael Lusky, a teacher in the University of Florida and contributor to theoretical resource economics. This book is divided into four sections— natural resources, uncertainty, general equilibrium systems, and policy and applications. In these sections, this text specifically discusses the resource depletion with technological uncertainty and the Rawlsian fairness principle; monopoly, uncertainty, and exploration; and price discrimination under uncertainty. The insurance theoretic aspects of workers' compensation; adverse selection and optimum insurance policies; and difficulty with Keynesian models of aggregate demand are also elaborated. This compilation likewise deliberates the exchange model of bilateral trade; optimal taxes on foreign lending; and extended linear permanent expenditure system (ELPES). This publication is a useful reference for economists and students concerned with theoretical resource economics.
Author: Danilo Rogelio Trupkin
Publisher:
ISBN:
Category :
Languages : en
Pages :
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The primary goal of this dissertation is to gain a better understanding, in the context of a dynamic stochastic general equilibrium framework, of the role of inventories and capacity utilization (of both capital and labor) and, in particular, the relationship among them. These are variables which have long been recognized as playing an important role in the business cycle. An analysis of the association between inventories and capital utilization seems natural, for physical capital could be seen as a stock ultimately destined to be transformed into an inventory of finished goods. In the same way, inventories could be seen as a stock of physical capital already transformed into finished goods. Introducing variable rates of utilization of capacity, then both can be seen as providing a short-run adjustment "buffer stock"mechanism. The analysis of the relationship between those variables is centered on the effects of two possible shocks: preference (demand) shocks and technology shocks. Impulse-response experiments show that inventories and the rate of capital utilization are mostly complements, while inventories and the rate of labor utilization are mostly substitutes. Moreover, low-persistence shocks emphasize the role of inventories asbeing a "shock absorber", whereas high-persistence shocks emphasize the role of inventories as being a complement to consumption. Consistent with the stylized facts in the literature, simulation results show that inventory holdings are pro-cyclical, while the inventory-to-sales ratio is counter-cyclical. Two additional "themes" are explored. The first has to do with the treatment of uncertainty and the consequences of using, as it is done in most of the literature, a first-order approximation. By approximating the decision rules to a second order, we observe that higher exogenous uncertainty enhances the importance of the precautionary motive to holding inventories. The second additional theme is a more general framework for the analysis of capital utilization. We find that the two most common ways of modeling capital utilization can't in a more general specification that incorporates spending on capital maintenance. Though the afore mentioned results do not vary qualitatively after that concept is introduced, quantitative answers do.
Author: K.R. Pearson
Publisher: Elsevier
ISBN: 008093403X
Category : Business & Economics
Languages : en
Pages : 409
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Book Description
"General-equilibrium" refers to an analytical approach which looks at the economy as a complete system of inter-dependent components (industries, households, investors, governments, importers and exporters). "Applied" means that the primary interest is in systems that can be used to provide quantitative analysis of economic policy problems in particular countries. Reflecting the authors' belief in the models as vehicles for practical policy analysis, a considerable amount of material on data and solution techniques as well as on theoretical structures has been included. The sequence of chapters follows what is seen as the historical development of the subject. The book is directed at graduate students and professional economists who may have an interest in constructing or applying general equilibrium models. The exercises and readings in the book provide a comprehensive introduction to applied general equilibrium modeling. To enable the reader to acquire hands-on experience with computer implementations of the models which are described in the book, a companion set of diskettes is available.
Author: Tryphon Kollintzas
Publisher: Springer Science & Business Media
ISBN: 1468463748
Category : Science
Languages : en
Pages : 278
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Book Description
This volume consists of six essays that develop and/or apply "rational expectations equilibrium inventory models" to study the time series behavior of production, sales, prices, and inventories at the industry level. By "rational expectations equilibrium inventory model" I mean the extension of the inventory model of Holt, Modigliani, Muth, and Simon (1960) to account for: (i) discounting, (ii) infinite horizon planning, (iii) observed and unobserved by the "econometrician" stochastic shocks in the production, factor adjustment, storage, and backorders management processes of firms, as well as in the demand they face for their products; and (iv) rational expectations. As is well known according to the Holt et al. model firms hold inventories in order to: (a) smooth production, (b) smooth production changes, and (c) avoid stockouts. Following the work of Zabel (1972), Maccini (1976), Reagan (1982), and Reagan and Weitzman (1982), Blinder (1982) laid the foundations of the rational expectations equilibrium inventory model. To the three reasons for holding inventories in the model of Holt et al. was added (d) optimal pricing. Moreover, the popular "accelerator" or "partial adjustment" inventory behavior equation of Lovell (1961) received its microfoundations and thus overcame the "Lucas critique of econometric modelling.
