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Buffer Stocks, Aggregate Activity, and Economic Policy

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  • Levi, Maurice D

Abstract

The buffer motive for holding inventories would lead us to expect that at any point in time inventory stocks might deviate from their long‐run desired level. These undesired inventory stocks will have subsequent effects upon output. This paper shows that if we fail to include a measure of the deviation of stocks from desired levels in a study of the effect of monetary and fiscal policy, we will attribute variability to the effect of policy that is not the result of the policies themselves.
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Suggested Citation

  • Levi, Maurice D, 1975. "Buffer Stocks, Aggregate Activity, and Economic Policy," Economic Inquiry, Western Economic Association International, vol. 13(1), pages 71-80, March.
    • Handle: RePEc:oup:ecinqu:v:13:y:1975:i:1:p:71-80
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    References listed on IDEAS

    as
    1. George A. Hay, 1970. "Adjustment Costs and the Flexible Accelerator," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 84(1), pages 140-143.
    2. Levi, Maurice D, 1973. "Errors in the Variables Bias in the Presence of Correctly Measured Variables," Econometrica, Econometric Society, vol. 41(5), pages 985-986, September.
    3. Milton Friedman, 1961. "The Lag in Effect of Monetary Policy," Journal of Political Economy, University of Chicago Press, vol. 69(5), pages 447-447.
    4. Charles C. Holt, 1962. "Linear Decision Rules for Economic Stabilization and Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 76(1), pages 20-45.
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