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Is There News in Inventories?

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  • Christoph Gortz

    (University of Birmingham)

  • Christopher Gunn

    (Carleton University)

  • Thomas A. Lubik

    (Federal Reserve Bank of Richmond)

Abstract

We identify total factor productivity (TFP) news shocks using standard VAR method- ology and document a new stylized fact: in response to news about future increases in TFP, inventories rise and comove positively with other major macroeconomic aggre- gates. We show that the standard theoretical model used to capture the effects of news shocks cannot replicate this fact when extended to include inventories. To explain the empirical inventory behavior, we therefore develop a framework that relies on the pres- ence of knowledge capital accumulated through a learning-by-doing process. The desire to take advantage of higher future TFP through knowledge capital drives output and hours choices on the arrival of news and leads to inventory accumulation alongside the other macroeconomic variables. The broad-based comovement we document supports the view that news shocks are an important driver of aggregate fluctuations.

Suggested Citation

  • Christoph Gortz & Christopher Gunn & Thomas A. Lubik, 2020. "Is There News in Inventories?," Discussion Papers 20-07, Department of Economics, University of Birmingham.
  • Handle: RePEc:bir:birmec:20-07
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    Cited by:

    1. Görtz, Christoph & Sakellaris, Plutarchos & Tsoukalas, John D., 2023. "Firms’ financing dynamics around lumpy capacity adjustments," European Economic Review, Elsevier, vol. 156(C).
    2. Christoph Görtz & Christopher Gunn & Thomas Lubik, "undated". "What Drives Inventory Accumulation? News on Rates of Return and Marginal Costs," Carleton Economic Papers 19-09, Carleton University, Department of Economics.
    3. Christoph Görtz & John D. Tsoukalas & Francesco Zanetti, 2022. "News Shocks under Financial Frictions," American Economic Journal: Macroeconomics, American Economic Association, vol. 14(4), pages 210-243, October.
    4. Bartosz Maćkowiak & Mirko Wiederholt, 2021. "Rational Inattention and the Business Cycle Effects of Productivity and News Shocks," SciencePo Working papers Main hal-03878704, HAL.
    5. He, Xin & Xu, Xinwei & Shen, Yu, 2023. "How climate change affects enterprise inventory management —— From the perspective of regional traffic," Journal of Business Research, Elsevier, vol. 162(C).
    6. Christoph Gortz & Christopher Gunn & Thomas Lubik, 2022. "Split Personalities: The Changing Nature of Technology Shocks," Carleton Economic Papers 22-06, Carleton University, Department of Economics.
    7. Christoph Gortz & Christopher Gunn & Thomas A. Lubik, 2024. "The Changing Nature of Technology Shocks," Working Paper 99119, Federal Reserve Bank of Richmond.
    8. Corey J.M. Williams, 2022. "The evolution of inventory dynamics in a post-crisis economy," Economics Bulletin, AccessEcon, vol. 42(4), pages 2214-2230.

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    More about this item

    Keywords

    News shocks; business cycles; inventories; knowledge capital; VAR.;
    All these keywords.

    JEL classification:

    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles

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