Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/95892
Authors: 
Förster, Marcel
Year of Publication: 
2014
Series/Report no.: 
Joint Discussion Paper Series in Economics 13-2014
Abstract: 
This paper introduces inventories in an otherwise standard dynamic stochastic general equilibrium model. Firms accumulate inventories to facilitate sales, but face a cost of doing so in terms of costly storage of intermediate goods. Based on U.S. data we estimate the parameters of our model using Bayesian methods. The results show that accounting for inventory dynamics has a significant impact on parameter estimates and the following analyses. We find that inventories enter the New Keynesian Phillips curve as an additional and significant driving variable and make the inflation process less backward-looking. Moreover, impulse responses can change in terms of magnitude and persistence. The variance decomposition reveals substantial changes regarding the driving forces of inflation and the nominal interest rate when we consider inventory holding.
Subjects: 
Inventories
Bayesian Estimation
DSGE Model
Business Cycles
JEL: 
C13
E20
E30
Document Type: 
Working Paper

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