Why does inventory investment fluctuate so much?

Lawrence J. Christiano*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

137 Scopus citations

Abstract

This paper argues that the role of inventories in buffering unexpected shocks to fundamentals can account for the substantial volatility observed in inventory investment. The argument is illustrated using a particular real business cycle model. An independent contribution of the paper is that it is a case study in the application of the Hansen-Sargent methodology for estimating the parameters of a linear quadratic optimization problem in a non-linear quadratic environment.

Original languageEnglish (US)
Pages (from-to)247-280
Number of pages34
JournalJournal of Monetary Economics
Volume21
Issue number2-3
DOIs
StatePublished - 1988

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

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