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Inventories in the Keynesian Macro Model

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  • Alan S. Blinder

Abstract

An otherwise conventional Keynesian macro model is modified to include inventories of final goods by (1) drawing a distinction between production and final sales, and (2) allowing for a negative effect of the level of inventories on production. Two models are presented: one in which the labor market clears and one in which it does not. Both models are stable only if the negative effect of inventories on production is "large enough." Both models also imply that real wages move counter cyclically -- in direct contrast to the usual implication of Keynesian models. Detailed analysis of the market-clearing model show that there should be negative correlation between the levels of inventories and output, and between changes in inventories and changes in output, over the business cycle. However, inventory change should be positively correlated with the level of output.

Suggested Citation

  • Alan S. Blinder, 1980. "Inventories in the Keynesian Macro Model," NBER Working Papers 0460, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:0460
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    Cited by:

    1. Seidmann, Daniel J., 1985. "Target buffer stocks," European Economic Review, Elsevier, vol. 27(2), pages 165-182, March.
    2. Alan S. Blinder & Louis J. Maccini, 1991. "Taking Stock: A Critical Assessment of Recent Research on Inventories," Journal of Economic Perspectives, American Economic Association, vol. 5(1), pages 73-96, Winter.
    3. Ogawa, Shogo, 2022. "Survey of non-Walrasian disequilibrium economic theory," MPRA Paper 115011, University Library of Munich, Germany.
    4. Franke, Reiner, 1996. "A Metzlerian model of inventory growth cycles," Structural Change and Economic Dynamics, Elsevier, vol. 7(2), pages 243-262, June.
    5. Blinder, Alan S & Maccini, Louis J, 1991. "The Resurgence of Inventory Research: What Have We Learned?," Journal of Economic Surveys, Wiley Blackwell, vol. 5(4), pages 291-328.
    6. Ogawa, Shogo, 2024. "Perceived and expected quantity constraints in inventory dynamics," MPRA Paper 120629, University Library of Munich, Germany.
    7. Eckalbar, John C., 1985. "Inventories in a dynamic macro model with flexible prices," European Economic Review, Elsevier, vol. 27(2), pages 201-219, March.
    8. Burim GASHI, 2014. "Fiscal Policy And Financial Crisis," Risk in Contemporary Economy, "Dunarea de Jos" University of Galati, Faculty of Economics and Business Administration, pages 262-270.
    9. Jerry R. Green & Jean-Jacques Laffont, 1980. "Disequilibrium Dynamics with Inventories and Anticipatory Price-Setting:Some Impirical Results," NBER Working Papers 0453, National Bureau of Economic Research, Inc.
    10. Ogawa, Shogo, 2022. "Capital and inventory investments under quantity constraints: A microfounded Metzlerian model," MPRA Paper 111906, University Library of Munich, Germany.

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