Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/197662 
Year of Publication: 
2018
Series/Report no.: 
Working Paper No. 2018:10
Publisher: 
Uppsala University, Department of Economics, Uppsala
Abstract: 
Combining micro and macro data, we construct demand-side shocks, which we take to be exogenous for individual firms. We estimate a reduced-form model to describe how firms adjust their production, employment, capital stock, and inventories in response to such shocks. Then, we chose the structural parameters of a theoretical model so that the theoretical model can match the impulse-response functions from the estimated reduced-form model. Firms' reactions to demand-side shocks are well explained by a model where firms have modest market power, face convex adjustment costs and where they can vary utilization flexibly. The stock-out motive helps to explain inventory dynamics.
Subjects: 
capacity utilization
production factor
labor hoarding
labor productivity
inventory holdings
returns to scale
production function
Solow residual
JEL: 
E22
E23
E24
E32
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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