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Price and Output Adjustment in a Model with Inventories: Econometric Evidence from Categorical Survey Data

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  • McIntosh, James, et al

Abstract

In this paper we investigate the role of inventories in the adjustment process of prices and output in response to demand and cost shocks, using the qualitative information contained in business surveys of U.K. firms. The discussion is organized around a model based on the assumption of monopolistic competition and which permits a production smoothing role for inventories. The econometric results suggest that the stock of inventories has no impact on output decisions. The effect on pricing decisions is weak at best Anticipated demands shocks are the main factor accounting for output changes, while both cost and demand shocks are important determinants of prices. Coauthors are Fabio Schiantarelli, Jon Breslaw, and William Low. Copyright 1993 by MIT Press.

Suggested Citation

  • McIntosh, James, et al, 1993. "Price and Output Adjustment in a Model with Inventories: Econometric Evidence from Categorical Survey Data," The Review of Economics and Statistics, MIT Press, vol. 75(4), pages 657-663, November.
    • Handle: RePEc:tpr:restat:v:75:y:1993:i:4:p:657-63
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    Cited by:

    1. Marcel Fafchamps Jan Willem Gunning & Remco Oostendorp, "undated". "Inventories, Liquidity, and Contractual Risk in African Manufacturing," Working Papers 97020, Stanford University, Department of Economics.
    2. Fafchamps, Marcel & Gunning, Jan Willem & Oostendorp, Remco, 2000. "Inventories and Risk in African Manufacturing," Economic Journal, Royal Economic Society, vol. 110(466), pages 861-93, October.

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