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An Analysis Of Inventory Investment In South Africa

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  • H. Smith
  • J.n. Blignaut
  • J.h. Van Heerden

Abstract

This paper describes the evolution of inventory investment in South Africa over the past two decades, and identifies the factors influencing inventory investment over this period. An econometric model of inventory investment in South Africa, based on the production smoothing approach, is constructed. The results of the model indicate that actual sales, production, unfilled orders, price levels, interest rates and expected sales have an influence on the evolution of inventory investment. These variables are directly or indirectly influenced by macroeconomic policy decisions and through their influence on inventory investment they also influence changes in gross domestic product. Therefore, prior information on the factors that influence inventory investment contributes to explaining changes in gross domestic product and may help to prepare more accurate short‐term forecasts of overall economic activity.

Suggested Citation

  • H. Smith & J.n. Blignaut & J.h. Van Heerden, 2006. "An Analysis Of Inventory Investment In South Africa," South African Journal of Economics, Economic Society of South Africa, vol. 74(1), pages 6-19, March.
    • Handle: RePEc:bla:sajeco:v:74:y:2006:i:1:p:6-19
    DOI: 10.1111/j.1813-6982.2006.00045.x
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    References listed on IDEAS

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    1. Ian Small, 2000. "Inventory investment and cash flow," Bank of England working papers 112, Bank of England.
    2. Darren Flood & Philip Lowe, 1993. "Inventories and the Business Cycle," RBA Research Discussion Papers rdp9306, Reserve Bank of Australia.
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    Cited by:

    1. Rangan Gupta, 2006. "FORECASTING THE SOUTH AFRICAN ECONOMY WITH VARs AND VECMs," South African Journal of Economics, Economic Society of South Africa, vol. 74(4), pages 611-628, December.
    2. Rangan Gupta, 2009. "Bayesian Methods Of Forecasting Inventory Investment," South African Journal of Economics, Economic Society of South Africa, vol. 77(1), pages 113-126, March.

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