Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/55615 
Year of Publication: 
2007
Series/Report no.: 
Working Papers No. 07-16
Publisher: 
Federal Reserve Bank of Boston, Boston, MA
Abstract: 
We build and estimate a two-sector (goods and services) dynamic stochastic general equilibrium model with two types of inventories: materials (input) inventories facilitate the production of finished goods, while finished goods (output) inventories yield utility services. The model is estimated using Bayesian methods. The estimated model replicates the volatility and cyclicality of inventory investment and inventory-to-target ratios. Although inventories are an important element of the model's propagation mechanism, shocks to inventory efficiency or management are not an important source of business cycles. When the model is estimated over two subperiods (pre- and post-1984), changes in the volatility of inventory shocks, or in structural parameters associated with inventories play a minor role in reducing the volatility of output.
Subjects: 
Inventories
business cycles
output volatility
Bayesian estimation
Great Moderation
JEL: 
E22
E32
E37
Document Type: 
Working Paper

Files in This Item:
File
Size
597.89 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.